Mortgage Rate Update May 3, 2011

Mortgage rates are unchanged this morning.

The interest rate markets are in a sideways holding pattern waiting on more significant economic data which will start tomorrow with the ADP employment report, continue on Thursday with weekly jobless claims, and conclude on Friday with the all-important jobs report.

Interest rates are currently caught between two competing realities.  First, the outlook for the economic recovery has worsened over the past month.  As a result, investors have sought relatively “safe” investments such as US-denominated fixed income securities which helps to drive yields lower.  Furthermore, in the wake of the killing of Bin Laden some analysts believe the world is more vulnerable to retaliatory terrorist attacks which can lead to greater uncertainty and a “flight-to-safety”.

However, from a technical perspective the current level of interest rates is butting up against a layer of resistance.  Therefore, it would take an extremely disappointing economic report or some other unexpected catalyst to mover rates much lower.

I believe that the markets will wait around for jobs data beginning tomorrow to make any decisive move.  I also think at this point that there is a greater probability that rates will move higher from present levels than there is moving lower.

I will remain in a locking position.

Current Outlook: locking