Fed Prompts Spike in Mortgage Rates

A sudden jump in bond market yields in the wake of Wednesday's Federal Open Market Committee meeting had translated into about a 1/4% increase in mortgage rates by midday Thursday, according to Barry Habib, author of the Mortgage Market Guide interest rate advisory service for originators."The market tanked pretty badly," said Art Frank, director of mortgage-backed securities research at Nomura Securities International Inc., describing the debt market's reaction to the Federal Reserve's most recent statement. Bond prices fell, and their rate-indicative yields -- which move in the opposite direction -- rose Wednesday due to the Fed's departure from past statements that they would hold rates stable for a "considerable period." In its most recent statement, the Fed replaced that wording with verbiage indicating that would be "patient" on the matter, a surprise move that initially unsettled the bond and stock markets. However, both bonds and stocks had recovered somewhat as of midday Thursday.