Rate Update May 27, 2010

Mortgage rates appear to be heading higher this morning.

For the past couple days now I’ve been recommending a “locking bias” mainly because of technical trading patterns.  It looks like interest rates may reverse higher in the near term.

Stocks around the globe are trading higher today after the China State Administration of Foreign Exchange announced that they were not planning on selling any euro-denominated assets.  This vote of confidence for the EU is helping stocks and pressuring interest rates higher.

The US Treasury is set to offer the final leg of its $113 billion weekly treasury auctions today.  Demand for the previous two auctions have been good but not better than expected.  A weak auction would pressure rates higher.

It appears that the momentum in the “flight-to-quality” trade, which has helped push rates lower over the previous weeks, is losing steam for now.  I expect rates to move higher in the near term.  BUT, the global economy still faces plenty of challenges so I wouldn’t be surprised to see rates move lower in another month.

Current outlook: locking bias