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Mortgage Rates and Bond Rates Move Higher Today While CD Rates Remain Stable

Mortgage Rates and Bond Rates Move Higher Today While CD Rates Remain Stable

Mortgage rates followed bond rates higher this Veterans Day while CD rates remain at current levels. On Friday, the October nonfarm payrolls report came in much stronger than any analysts expected, despite the federal government shutdown. For the month of October, 204,000 nonfarm jobs were created, much higher than the market forecast which ranged from expectations of 85,000 to 100,000.

The news sent long term bond rates higher as markets feared an end to quantitative easing by the Federal Open Market Committee (FOMC). Whether or not the FOMC slows their easing sooner than later remains to be seen. The next two nonfarm payrolls reports will also have been affected by the federal government shutdown, clouding the numbers.

Average 30 year conventional mortgage rates increased to 4.27 percent today, up from an average 30 year mortgage rate of 4.15 percent last Thursday. 10 year bond rates which closed on Thursday at 2.61 percent are now trading at 2.75 percent. During this time, the best CD rates on 1 year certificates of deposit remain stable at 1.05 percent APY.

FOMC Will Keep a Lid on Interest Rates Until 2014

Another factor coming into play as to when the FOMC will either start to slow or end their easing is if Janet Yellen is confirmed as the new Fed Chair. Yellen, who was picked for the job by President Obama, was thought to be a shoe-in for the job but politics are coming into play that may block her confirmation.

Lindsey Graham, the Senator from South Carolina, has stated he will block Yellen's conformation until he gets more answers on Benghazi. Yellen has been in favor of keeping the easing going longer than most of her colleagues on the Fed Committee.

In the past, Yellen has stated the Fed should keep the federal funds rate at the current level, near zero percent, until the unemployment rate falls to 5.5 percent. The FOMC's stated position has been to keep it near zero percent until the unemployment rate falls below 6.5 percent.

Either way it looks like the FOMC won't start slowing their purchases until sometime early in 2014. The Fed won't increase the federal funds rate until the summer of 2014.

Mortgage Rates and CD rates Will Remain Near Current Levels

For the rest of 2013, bond rates and mortgage rates will fluctuate in current ranges. The FOMC isn't expected to lighten up on their purchases of long term bonds and mortgage-backed securities (MBS) in 2013. The FOMC will also keep the fed funds rate at near zero percent for the rest of the year.

This will keep a lid on how high interest rates move, which will be more dependent on economic data that is released. 10 year bond rates will remain under 3.00 percent and probably trade in a range of 2.50 percent to 2.90 percent. 30 year conforming mortgage rates will trade in a range of 4.20 percent and 4.70 percent.

CD rates on short term certificates of deposit won't change at all since those rates aren't tied to the direction of bond rates. Bank CD rates will move higher when the FOMC increases the fed funds rate, which shouldn't be until 2014.

Author: Brian McKay
November 11th, 2013