Rate Update December 23, 2009
Mortgage rates are unchanged from yesterday. The good news is that mortgage-backed bonds (MBS’s) have stabilized this morning and are trading modestly higher for the first time in 4 trading days.
MBS’s are rallying on weaker than expected economic data. New home sales reportedly fell 11.3% in November according to the Commerce Department. Although Personal income and spending increased last month it did so at a slower pace than analysts had been expecting. Lastly, the Personal Consumption Expenditure (PCE) price index showed inflationary pressure remains subdued in the economy. Since inflation is the primary factor that drives mortgage rates this is a good sign.
After rates rose by .25%-.50% over a 3 day period we are happy to see MBS prices stabilize. We are going to switch to a neutral position.
Current outlook: neutral