Rate Update April 8, 2010

Yesterday we shifted our outlook to floating here on ‘rate update’ and the move paid off as rates have improved.

Mortgage rates closely follow the 10-yr Treasury note and the chart below is a good example of technical trading patterns.  After the yield on the 10-yr note touched 4.00%, a technical layer of resistance, they backed off.  Over that time frame mortgage rates hit 5.25% and have since retreated.

10-yr treasury yield-1 month

The US Treasury will conclude their bi-weekly bond offering today with $13 billion in 30-yr bonds.  An interesting tidbit to consider; if you were to retire today with $1,000,000 to live on for the rest of your life and purchase 30-yr bonds at the current yield of 4.73% you’d generate $3,151 of inflation adjusted monthly income.  If yields were closer to their historical norms you’d be able to generate almost $5,000 per month.  I hope yields are closer to historical norms when I retire.

Following today’s treasury auction there is nothing more scheduled for the week so expect mortgage rates to react to news out of Greece and the stock market.  Since we’ve seen an improvement in rates we are going to shift back to a neutral position.

Current outlook: neutral