Rate Update November 10, 2010

Mortgage rates are higher this morning.

Mortgage-backed bonds (MBS’s) have started the day lower for the 4th-straight trading day pushing mortgage rates higher.  What’s ironic is that this follows the Fed’s announcement that they would engage in a $600 billion quantitative easing (QE) strategy with the objective of pushing rates lower.  So why have rates reacted in an opposite manner?

Both MBS & US Treasury investors are worried that the additional $600 billion in QE will spark inflationary pressure in our economy.  If you’re curious to understand the economic theory that explains how additional money supply can lead to higher inflation check out THIS POST.

The US Treasury is set to auction $16 billion in 30-year bonds today.  The longer duration of the 30-year term makes these securities more vulnerable to future inflationary pressure so it will be interesting to see what kind of demand this auction will foster.

Also hurting mortgage rates is better than expected economic news.  Today weekly jobless claims were reported lower than expected boosting optimism for the economic recovery.

Current outlook: locking

The views and opinions expressed in this site are those of the author(s) and do not necessarily reflect the official policy or position of Cherry Creek Mortgage Co., Inc. This is for informational purposes only. This is not a commitment to lend.