Mortgage rates shot significantly higher after today’s FOMC Minutes reminded markets that the Fed is still intently considering a reduction in asset purchases. Most lenders are a full eighth of a point in rate higher than yesterday’s latest rate sheet offerings–many of them fared even worse. The most prevalently quoted conforming 30yr fixed rate for ideal scenarios (best-execution) is now easily back up to 4.375%, and some lenders are closer to 4.5%. Essentially, today’s rate sheets are very similar to last Wednesday’s–one of the weakest days since mid September.
Today’s FOMC news comes in the form of the Minutes from the most recent policy-setting meeting. That means we simply got a closer look at what the Fed was considering at the end of October before releasing their official policy statement. While recent Fed speeches have placed increased emphasis on the Fed’s policy rate (“Fed Funds Rate”–the thing that’s at “0-.25%”) being low for long periods of time and on economic conditions not yet justifying a reduction in asset purchases, today’s Minutes suggest otherwise.
If the Fed is perceived as being more willing–or even eager–to reduce the pace of asset purchase, it has a direct negative effect on bond market trading levels. These include US Treasuries and the closely correlated Mortgage-Backed-Securities (MBS) which most directly affect mortgage rates. While the fed did communicate that a reduction in bond buying remains dependent on data, the meeting in question took place before the most recent jobs report was released. Some might take this to mean that the Fed would be even more interested in reducing asset purchases than these minutes could have conveyed.