Rate Update November 19, 2009

Mortgage rates are unchanged from yesterday.

The fact that mortgage rates, like other long-term yields, remain low is a sign that investors are concerned about the pace of the economic recovery.  For an investor to accept a fixed yield under 3.5% for 10 years when inflation is forecasted to increase to 3-5% in the next few years tells us that many market participants are not optimistic about the near-term prospects.

Yield Curve as of today
Yield Curve as of today

The Conference Board released the monthly index of leading economic indicators this morning which is designed to be a future indication of economic activity.  The report showed an increase for the 7th consecutive month but unfortunately the increase was less than expectations.

Later today the US Treasury will announce the size of their 2-year, 5-year, and 7-year note auctions scheduled for next week.  Most analysts are expecting the auctions to total $116 billion size.  A surprise to on the upside could raise supply concerns and push rates higher.

Given that rates remain near historic low levels we remain in a locking position with the idea that rates have more to lose than to gain at this point.

Current outlook: locking