Repeat after me: Fed Funds are set by the Federal Open Market Committee, don’t vary daily, and have no direct bearing on 30-yr mortgage rates. 30-yr mortgage rates are set by supply and demand through the bond markets, vary every day, and prices are adjusted by what investors & servicers want to see flowing into their portfolios.
According to Fed Chairman Bernanke, the Fed still expects the labor market to improve very slowly, so they are reluctant to remove monetary stimulus by raising rates. Fed officials believe that inflation will remain low for the next couple of years, meaning that there is little short-term pressure to raise rates. But mortgage rates are not set by the Fed, or their thoughts on inflation – they’re set by “the market”.
Hats off to Citigroup, who announced it has struck a deal with the government to return $20 billion in bailout money to taxpayers through a combination of stock and debt, the bulk of which would come from a $17 billion common stock offering. Citigroup received $45 billion of bailout money, and then the government converted $25 billion of its preferred-stock stake in the company into common stock over the summer. That effectively gave U.S. taxpayers a 34% stake in the company. It is nice to see some of “our” investments paying off. This pretty much leaves Wells Fargo as the largest mortgage investor still owing without a plan.
Abu Dhabi, one of the seven United Arab Emirates, will be giving Dubai, another one of the seven, a $10 billion “lifeline” to head off a bond default. T…