Rate Update May 1, 2009

Fixed Mortgage Rates are even with yesterday.

Mortgage Backed Bonds are currently trading lower on the day but have managed to bounce off of a floor of support that is made up by the 50 and 100 day moving averages.  If bonds can continue to stay above these levels, we could see some price improvement in the next few days.  Since bonds have already tested the floor of support earlier in the day and rebounded off, I am hopeful that they will continue to do so…but if bonds do break through those levels, they have a long way to go until the next floor of support (75 basis points below).  For now, I think floating is a reasonable outlook.

Yesterday it was announced that the New York Red purchased $23 billion in Mortgage Backed securities last week, bringing the total year to date amount to $400 billion.  Remember, the Fed has said they were planning to purchase $1.25 Trillion in Mortgage Backed Securities before all is said and done…so there is still a long ways to go.

Current Outlook: Floating while bonds stay above the current level of support