Rate Update October 16, 2009

Mortgage rates are higher this morning.

Mortgage-backed bonds have dropped significantly over the past week pushing mortgage rates +.25% higher off the lows.  We have been in a short-term floating position over the past week hoping that MBSs would find support at the 200-day moving average.  However, even with weakness in the stock market today, due to weak earnings from bellwethers Bank of America & General Electric, MBSs are having trouble finding traction.

Due to technical trading patterns we still believe rates can improve but floating just got a whole lot riskier.  We are shifting our outlook to neutral with a long-term locking bias.

Current outlook: neutral, locking long-term