Rate Update December 28, 2009

Mortgage rates are under pressure again today.

Long-term treasury notes and mortgage-backed bonds (MBS’s) are trading lower this morning as the US Treasury gets set to deliver $118 billion in treasury note supply this week.  It kicks off today with $44 billion in 2-year notes.  The additional supply of treasury notes competes with MBS’s for investment dollars.  Therefore, a greater supply weighs on prices across the bond market; pushing yields higher.

We will get a few economic reports tomorrow and Wednesday that could move the markets.  With mortgage rates moving higher in a thinly traded market I believe we could see rates rebound at the beginning of the year.  However, given the momentum behind the current move it’s a risky proposition.

Current outlook: neutral