Rate Update June 4, 2009

Fixed Mortgage Rates are even with yesterday

Mortgage Backed bonds are trading lower this morning but haven’t seemed to trigger lenders to come out with worse pricing since yesterday.  Bond prices falling today are thought to be a result of next weeks expectations of another Treasury Auction that will once again add dreaded supply to the US bond market.  As you know, this added supply has killed bond prices over the past couple weeks.  Not only have these auctions caused bond prices to fall, the added supply of Treasury Bills on the market has depleted the US dollar against other currencies and helped oil prices soar.

The Treasury has seen the effects of these auctions and has decided to cut back on the amount of Treasuries auctioned off next week.  This cut back is hoped to stop the negative momentum that has occurred due to the heavy auctioned amounts.  Also on the side of bonds could be the position of the stock market.  Technical patterns show that the stock market is up against a strong level of resistance at the 200 day moving average.  If stocks can’t break through this level and retreat from current levels, bonds may benefit.  The Job’s report comes out tomorrow and if the numbers are still ugly, stocks could suffer from the news, which would also help out bonds.  For now, it should be safe to float as bonds could be poised to make a small comeback if the stock market reverses.

Current Outlook: Floating