Rate Update June 23, 2010

Mortgage rates are better again this morning.

The Commerce Department reported earlier this morning that new home sales collapsed in May.  Analysts were expecting a 20% decline in new home sales but they actually fell by 33%.  The decline shouldn’t be a huge surprise given the expiration of the home buyer tax credit but the markets are acting like this number came out of nowhere.  Stocks are lower which is helping mortgage rates.

Yesterday’s 2-year treasury note auction was met with strong demand which is good for mortgage rates.  Today the Treasury will auction $38 billion in 5-year notes.

The big news event of the day will take place around lunch time on the West Coast when the Fed releases its post-monetary meeting statement.  Some analysts believe they will remain upbeat about the economic recovery despite the negative sentiment on Wall Street.  If they do and the markets buy into it we could see rates move higher.

From a technical perspective mortgage-backed bonds (MBS’s) appear overbought so it looks like it might be a good time to lock in.

Current outlook: locking bias