Rate Update December 7, 2010
Mortgage rates are worse today.
The improvement in rates following Fed Chairman Ben Bernanke’s comments on ’60 minutes’ is proving to be short-lived this morning. Overnight, the Obama Administration struck a deal with Republican lawmakers in Congress to extend the Bush-era tax cuts for all income earners. The announcement addresses a few other tax provisions that were set to expire on December 31st (Once the deal is signed into law I will blog about the details @ www.swansonhomeloans.com).
The announcement is bad for interest rates on two fronts. First, the markets now have greater certainty over what the tax code will look like for at least the next 24 months. Stocks like certainty and they are rallying this morning which is putting pressure on rates to move higher.
Second, the extension of the tax cuts is estimated to add $700 billion to the Federal deficit which will trigger the government to deliver more bond supply to the markets over the next 24 months. Click THIS LINK to understand how this would be bad for mortgage rates.
Speaking of which, the US Treasury is back on the auction block today offering $32 billion in 3-year notes. Unfortunately we have to switch back to a locking position.
Current outlook: locking