Rate Update March 24, 2010

Pricing on mortgage rates is worse this morning.

Mortgage-backed bonds (MBS’s) came under heavy selling this morning.  Bond supply seems to be weighing on traders minds as the US Treasury sets to deliver $42 billion in 5-year notes later today.  Yesterday’s $44 billion auction was met with average demand.  Corporations have also been adding to the heavy debt supply as of late.  Click HERE to understand how additional debt supply can cause mortgage rates to rise.

The Commerce Department reported this morning that durable goods orders in February rose for the third straight month.  When you back out auto and defense industry sales the numbers surged.  Good news for the economy is bad news for mortgage rates and this report is also likely pressuring rates higher.

A couple international headlines caught my attention this morning.  First, Moody’s downgraded Portugal’s credit rating.  Like Greece, concern over the fiscal health of Portugal could cause investors to seek the “safety” of US denominated debt which would help mortgage rates.  Second, there is increasing attention being paid to the US Dollar vs. Chinese Yuan valuation debate.  US leaders and now Chinese business leaders or pressuring the Chinese Government to allow the Chinese currency to fluctuate in value based on market forces.  However, thus far the Chinese government has refused.  I’ll keep an eye on this story and blog later on possible implications to mortgage rates.

I am going to shift to a neutral position with the hope that technical trading patterns cause rates to improve back to yesterday’s levels.

Current outlook: neutral