Bankrate also prints a decent weekly roundtable on the direction of rates.

http://www.bankrate.com/brm/static/rti.asp


In addition, even though current spreads are out of whack with the 10 year treasury, tracking its movements still has merit.

http://finance.yahoo.com/q?s=%5ETNX

Bankrate says the same:

http://www.bankrate.com/brm/news/fed/ ... Mar182008.asp?s=1&caret=3

Another article for those that are interested. I've been trying to tell my clients this but everyone seems to think that is going to help. The best time to lock rates is just before the Fed Cuts not after. The traders take profits and the rates spike after. I spent all day on the phone yesterday explaining this to people but they just don't seem to get it.


A Fed Rate Cut Could Send Your Mortgage Rate Even Higher

by David Goldman
Tuesday, March 18, 2008provided by

The Federal Reserve cut interest rates by three-quarters of a percentage point Tuesday, but don't expect mortgage rates to go down too. In fact, home loans could be heading higher.

Consider recent history: The Fed issued an emergency cut of short-term rates in early January, and then trimmed more just a few days later - but the 30-year fixed mortgage rate has responded by bouncing up from 5.6% to 6.4%.



The Fed's main tool is control over the short-term fed funds rate, which determines what banks charge each other for overnight loans. Long-term mortgage rates are mostly tied to the 10-year Treasury yield, which is determined by bond traders worldwide.

"There is a long disconnect between the fed funds rate and fixed mortgage rates," said Keith Gumbinger, vice president of mortgage and consumer loan information publisher HSH.com.

Inflation drives long-term fixed rates. When the Fed cuts short-term rates, the intent is to lower borrowing costs for corporations so that they'll invest and hire. But this economic growth can lead to inflation.

That in turn leads bond traders to demand higher rates on their long-term bonds - and that drives up mortgage rates too.

"Mortgage rates are determined by how fearful the market is of inflation," said Gumbinger.

The Fed began a series of cuts to its key interest rate last September, taking the rate to 2.25%, from 5.25%.

ARM borrowers may get help. There is more of a connection between Fed rate cuts and short-term and adjustable rate mortgages (ARMs). In fact, homeowners with ARM loans could see lower rates from further interest rate cuts.

Adjustable rate mortgages are pegged to a number of different indexes, including the one-year Treasury yield and the international Libor, or London Interbank Offered Rate, which tend to move with the Fed funds rate.

With Tuesday's rate cut, the cumulative effect of the Fed cuts could entirely offset what would have been a significant rate reset for many homeowners.

For instance, a borrower with an adjustable rate of 4.5% could have faced a rate reset up to 7.5% before the Fed started cutting rates in September. Before the rate cuts, that homeowner would have seen an increase of $370 in monthly payments on a $200,000 loan.

But after Tuesday that rate could reset only a little higher. And for some, the rate might not go up at all - and may actually drop - according to Greg McBride of Bankrate.com. "The Fed rate cuts far are more significant to [borrowers with ARMs] in terms of staving off delinquencies on loans," he said.

Long-term rate solution

Sending long-term fixed rates back down will be more complicated than fixing inflation, because the continuing housing crisis is also exacerbating the rise in long-term fixed rates.

Generally mortgage rates are about 2 percentage points higher than the yield on the 10-year Treasury, which currently stands at 3.29%.

But the housing market is in such turmoil that rates are even higher right now, with lenders concerned that borrowers will not be able to pay back loans.

"The 30-year fixed rate mortgage should be at 5.5%, but instead it's above 6%," said McBride. "The 30-year jumbo loan [a large mortgage that is not federally guaranteed] is a full two percentage points higher than it should be."

So for long-term fixed mortgage rates to go down, the Fed must successfully make banks more willing to lend again.

Why Fed Rate Cuts Do Not Equal Lower Mortgage Rates

By Barry Habib, Contributing Editor to CNBC.com

Last Updated: February 4, 2008



The Federal Reserve has been on a rate cutting spree once more. Many mortgage applicants are calling

their mortgage representative and expecting a lower interest rate. Others who have been waiting to

refinance are puzzled as to why mortgage rates have not moved lower during the recent five Fed rate

cuts. This is difficult to explain to consumers who have watched a 2.25% reduction by the Fed with very

little benefit in mortgage rates.



Is a Fed rate cut really good \news for mortgage rates? The facts may be surprising. The Fed can only

control the Discount Rate and the Fed Funds Rate. This is very different from mortgage rates. A

mortgage rate can be in effect for 30-years while a rate set by the Fed can change from one day to

another.



It is often said history repeats itself. And if history is any teacher, we can learn from what happened to

mortgage rates the last time the Federal Reserve was in a rate-cutting cycle.



The last time the Fed was in a lengthy rate cutting cycle was back in 2001 from January 3, 2001 to

December 11, 2001. In the span of 11 months, they cut the Fed Funds rate 11 times with eight of those

cuts by 50bp. This resulted in a total of 475bp or 4.75% in short-term interest rate cuts taking the Fed

Funds Rate from 6.00% down to 1.75%. Now most uninformed people would naturally think because the

Fed cut rates by so much during this time that mortgage rates would follow suit and trend lower as well.

Not so. Mortgage rates actually moved higher during this time of significant rate cuts because inflation,

the arch enemy of bonds, gradually rose.



Now let?s take a look at what happened with the Fed?s most recent cutting cycle, the first since 2001. On

September 18, 2007 the Fed cut the Fed Funds Rate by 50bp. The mortgage bond market briefly

enjoyed a ?knee-jerk? reaction to the Fed move by closing higher that day, but lost 140bp over the

following two sessions. Then on October 31, 2007 the Fed lowered the Fed Funds rate by 25bp. The

mortgage bond market responded by losing 78bp over the following five trading days. On December 11,

2007 the Fed once again lowered rates by 25bp and the mortgage bond market lost 88bp in the next

three days. This past month, the Fed delivered a surprise 75bp rate cut on January 22, 2008 and

mortgage bonds lost a whopping 144bp in just 2 days. Eight days later and as widely expected, the Fed

cut rates by 50bp and mortgage bonds had little reaction ? but, were unable to recover the enormous

pricing loss seen back on Jan 23, the day after the surprise 75bp cut.



Please refer to the Table below.



Fed Rate Cut Date Rate Cut Size MBS Pricing Change

09/18/2007 50bp -140bp in 2 days

10/31/2007 25bp -78bp in 5 days

12/11/2007 25bp -88bp in 3 days

01/22/2008 75bp -144bp in 2 days