Mortgage rates ended last week slightly better than they started it. 30 year fixed “par” rates have remained in between a range of 4.875%-5.125% since mid August.
This morning virtually all asset classes are trading higher. Here on ‘rate update’ we often talk about the inverse relationship between stocks and bonds. Typically when stocks are higher it is driving the price of mortgage-backed bonds (MBS’s) lower causing rates to rise.
However, this morning stocks and MBS’s are trading higher as are other asset classes such as commodities.
What is causing this? A weak US dollar. The US Dollar index is trading at 15-month lows which is making US assets cheaper for foreign investors.
Strong foreign demand for US-denominated assets may help absorb this week’s $81 billion in US Treasury auctions. It concludes on Thursday when the Fed will issue 30-year bonds. If the appetite for long-term US debt is weak on Thursday we’d expect mortgage rates to move higher.
Current outlook: neutral near-term, locking long-term