Rate Update November 4, 2008

Mortgage rates are effectively unchanged this morning.

At last election day has arrived.  It is such a privilege to live in a country where the citizens have the ability to vote.  I am very grateful (especially because as of today the annoying media ad’s will cease).

However, whoever is elected today is inheriting some significant financial challenges.

Mortgage-backed bonds have opened higher this morning.  The Australian Reserve Bank (central bank) slashed short-term interest rates by a larger than expected .75% today.  The move has lead some analysts to believe that the European Central Bank & Bank of England may also cut deeper than expected later this week.

When foreign central banks cut interest rates it often creates greater demand for US denominated assets because the relative yield for US assets becomes more attractive.  This likely explains why mortgage-backed bonds are trading slightly higher this morning along with stocks.

Looking ahead we still believe that technical trading patterns will help rates move lower in the coming weeks.  Shorter term transactions are more difficult to call.

Current outlook: neutral with floating bias