Rate Update November 16, 2009

Mortgage rates remain low this morning.  Mortgage-backed bonds(MBSs) traded higher for the 7th consecutive session on Friday.

This morning MBSs are slightly higher but as I indicated on Friday I am very cautious at this point.  Whenever mortgage rates improve for 7 consecutive days they become ripe for reversal.

The US Dollar continues to weaken this morning.  It has now breached $.75 on the Dollar index and appears to be heading back towards the lows we saw in 2007.  The cheaper dollar is allowing foreign investors to buy US denominated assets with low exchange rates (and borrow money at low rates).  This is likely the reason why both stocks and bonds are trading higher this morning (these two asset classes tend to trade inversely).

US Dollar Index (2007-current)
US Dollar Index (2007-current)

Looking ahead, Fed Chairman Ben Bernanke speaks to the NY Economic Club at lunch today.  The topic of his presentation is the economy so we’ll need to keep an ear out for his comments.  Both tomorrow and Wednesday brings inflation data in the form of the Producer Price Index (PPI) and Consumer Price Index (CPI).  As we know inflation is the primary force that drives mortgage rates so we’ll keep an eye on those reports as well.

For now we maintain a locking position.

Current outlook: locking bias