Rate Update October 12, 2009

The bond market is closed today in recognition of Columbus Day.  Mortgage rates are higher following Friday’s massacre in the mortgage-backed bond (MBS) market.

On Friday, MBSs dropped 75 basis points, the largest one day drop in a longtime.  We’re not entirely surprised by this.  I’ve been recommending a locking position for two weeks now.  In fact, in Thursday’s ‘rate update’ I said, “…once mortgage rates begin to move higher we expect them to do so quickly.”

MBSs will face technical support at the 200-day moving average when they begin trading again tomorrow.

Current outlook: neutral