Rate Update June 24, 2009

Fixed Mortgage Rates are even with yesterday.

Two important events are taking place today that can drastically change Mortgage Backed Bond prices moving forward.  The first event is the Fed releasing their Monetary Policy Decision at 11:15 pacific time.  I have been saying for the past couple days that they will not be changing the Fed Funds Rate but their comments afterwards could be a market mover.  If there is no mention about any continuing long term debt purchases, it would be bad news for Mortgage Backed Bond prices and we would likely see higher interest rates in the coming days.  Read yesterday’s Rate Update for a reminder on why this would happen. 

The second event that is occurring today is the auction of $37 Billion in 5-year notes.  Yesterday’s $40 Billion auction was received rather well (as you can see rates remained the same today) but will there be enough demand to buy up these auctioned notes?  If not, we could see mortgage rates increase as well.  What should out trump any negative news for Mortgage Backed Bonds however is if the Fed announces further plans to purchase long term debt (Treasuries), which would allow some breathing room for Mortgage Rates.  It is expected that an announcement similar to this will be made and therefore we will advise to carefully float heading into the announcement.

Current Outlook: Very cautiously floating