Rate Update November 10, 2008
Mortgage rates are modestly higher this morning.
Mortgage-backed bond prices continue to walk a tight rope along the 200-day moving average. This important level of technical support/ resistance is what we’ll have our eye on over the course of the next few days.
If mortgage-backed bond prices can manage to remain above this level then we’ll continue to advise a floating position. However, if prices break below this level then we’d immediately shift our outlook to a locking stance.
There is a lot to talk about this morning in terms of financial headlines (warning: the news is grim):
* Over the weekend China announced that it would invest $586 billion into their infrastructure as a way to stimulate the economy. This cause overseas stock markets to rally which could hurt mortgage rates.
* This morning AIG, the nation’s largest insurer, announced an operating loss of $24.7 billion for the 3rd quarter. In response, the Federal government announced an increase to the lifeline it had proposed for the company worth $150 billion (up from $123 billion). Bad news for the economy can often be good news for mortgage rates but in this case it’s costing the Federal government huge amounts of money which could put pressure on the US dollar. A weak US Dollar is bad for mortgage rates.
* Lastly, on Friday General Motors (GM) announced that it was quickly running out of cash and would likely run out by the end of the year if nothing changed. Much like the housing industry the auto industry benefited from easy financing over the past few years. Today demand for new cars is off 35% and the auto firms are suffering. Should GM fail the impact on the housing market would likely be felt nationwide.
Current outlook: watching the 200-day moving average- locking bias