Rate Update May 21, 2009

Fixed Mortgage Rates are even with yesterday.

Mortgage Backed Bonds got a bit of a boost yesterday afternoon as the Fed minutes were released from the April 29th meeting.  In the announcement it was noted that some Fed members were open to the use of an additional $500 Billion to purchase Mortgage Backed Debt on top of what they have committed to spending.  The Fed still has about $700 Billion left of the initial 1.25 Trillion so it would be quite a while until the extra $700 Billion would be needed, but nevertheless the bond trading floor reacted fairly positive to the news.  The important thing to remember here is that these comments were made 4 weeks ago and nothing has materialized from them yet so by the time the Fed would be using these funds, the idea could have fizzled into thin air.  In other words, I am not holding my breath.

Other announcements in the Fed minutes that helped bonds yesterday was a revision of the GDR downward, and the revision of unemployment increasing.  This was bad news for stocks, which pulled money out of the stock market and into the bond market.  This morning we are seeing both markets trade fairly even and although there isn’t much to gain by floating right now since bonds are up against a ceiling of resistance…there doesn’t seem to be much danger in floating.

Current Outlook: Floating

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