Rate Update October 22, 2009
Mortgage rates are slightly higher this morning.
Concerns over Treasury supply next week are weighing on the bond market. In a few minutes the US Treasury will announce the supply of 2-year, 5-year, and 7-year treasury notes they will auction next week.
Many analysts believe they will auction as much as $115 billion. Think about that for one second, the US government currently needs to auction $115 billion in treasury securities every two weeks (If you haven’t yet watched the film IOUSA I would highly recommend it).
Extra supply of fixed income securities hurts mortgage rates because the mortgage-backed bond market is required to raise yields in order to attract investors. Mortgage-backed bonds (MBSs) remain at important technical support. As long as we can remain here there is a chance rates could improve. However, safe play is to lock because if MBS prices break this support rates will move sharply.
Current outlook: neutral so long as MBS prices remain at or above technical support, locking long-term