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Last week’s credit market worries all reversed now

Mortgage market commentary

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One week ago, the credit markets were worried by signs of a housing bottom, economic strength, inflation risk and the possibility that the Federal Reserve might have to hit us again. But, that's all reversed now: the 10-year T-note is down from 4.84 percent to 4.68 percent, with mortgages following from a high of near 6.5 percent to now under 6.25 percent. Stay centered here: we'll get the first data from October at the end of next week, and until then I'll be suspicious that this rate decline has room to run. The Fed's mid-week statement was the catalyst for sentiment change: after a recitation of economic and inflation dampers, the key line is, "Some inflation risks remain." (Not significant risks, just "some.") The Fed isn't considering an ease, but isn't going to tighten, either. Caution: the risk of rising inflation has abated, but the core rate is way above the target range. The background debate at the Fed, revealed in deep memoranda on Monday, is whether inflation can decline t...