30 Year Freddie Mortgage Surges By 22 Bps Over Last Week, Highest Since August At 4.39%
After posting an all time low rate of 4.17% in the week ended November 11, the 30 Year Freddie Mac Fixed-Rate Mortgage has surged by 22 bps to 4.39%, the highest average rate since August 19, before QE2 had started to be priced in. This is a direct reaction to the recent drubbing in the 10 Year bond which continues to see an unwind of the QE2 frontrunning trade. Which brings the Fed to the key dilemma: does it focus once again on reducing interest rates, as a continuing widening in mortgages will make home purchases increasingly more problematic, foreclosure crisis aside, or does it persist in sponsoring the imaginary "wealth effect" by pushing stocks ever higher. It seems the inflection point where investors would buy both bonds and stocks with the same fervor has passed, and the time for Bernanke to choose one of the two has come. Of course, a simple resolution would be to start leaking QE3. And with the municipal collapse continuing today, the Fed's choice may soon be moot.