Tuesday, June 19, 2012

New Basis Points for Mockery

I am very much amused that an interest decline of 14 basis points (summed over three days) is discussed at length by Michael Bauer at the SF Fed. This is not close to statistically significant at standard confidence levels.

But Here is a new record a big deal Jon Hilsenrath at the Wall Street Journal makes a big deal out of 13 basis points

Interest rates are now falling more for people with good credit than those with poor credit. Rates on a 30-year mortgage for households with high credit scores of 750 using Fair Isaac, or FICO, ratings, have fallen from 4.44% to 3.53% in the past year, according to the website Loansifter.com. For households with low credit scores of 650, they have moved from 4.82% to 4.04%.

The article is generally very good. It is hard (or for all know impossible) to get numbers on mortgage applications which are turned down, and the tiny change in the difference in rates is a number, so it is solid data. And people don't notice that tiny numbers are tiny.

I must now find someone who draws strong conclusions based on a change of 12 or fewer basis points.


JW Mason said...

I'm confused. The quoted passage mentions a 91 bp and a 78 bp change. Where's the 13 bp one?

chrismealy said...

You ever look at the 10 year TIPS? That thing is all over the place.

JW Mason said...

Oh, it's the difference between them. Never mind!