Rate Update May 6, 2008

A disappointing earnings report out of Fannie Mae is pressuring stocks lower this morning. This weakness is helping to support mortgage-backed bonds prices right at an important technical layer of support. If bonds can rally off this support level it would be a welcome sign for mortgage rates.

Working against interest rates is the ever-increasing price of oil. The price for a barrel of oil has hit $120 and one Goldman Sachs analyst believes it could go as high as $150-$200 over the next 12 months. This would certainly have inflationary impacts on our economy that would likely cause rates to rise.

Current Outlook: neutral with floating bias