Rate Update March 25, 2010

Mortgage rates are worse this morning.

Only one word can describe yesterday’s bond market U-G-L-Y.  Mortgage-backed bonds (MBS’s) finished the day down 90 basis points which is the worst one day loss since June 1, 2009.  What is spooking investors?

Traders are finally pricing in the huge supply of government debt which is coming down the pike.  The US Government is on pace to rack up a $1 trillion budget shortfall this year which will need to be financed through the US Treasury.  You can read about this effect HERE.

Demand for yesterday’s 5-year Treasury note auction was weaker than analysts had been expecting.  Today the US Treasury will deliver $32 billion in 7-year notes.

Not much in the way of economic data out today but at this point the damage has been done.  I will shift back to a locking position.

Current outlook: locking