Rate Update October 26, 2010

Mortgage rates are worse this morning.

Better than expected economic data out of the UK is pressuring rates higher.  The UK Office of National Statistics announced today that the UK economy grew at a faster clip than analysts had expected for the 3rd quarter.  This announcement is putting pressure on the “flight-to-quality” trade that has helped keep rates low.

The US Treasury steps back on the auction block today with $35 billion in 2-year notes.  Yesterday’s 5-year TIP’s auction was met with strong demand as will today’s.  Click HERE to understand how government borrowing can impact mortgage rates.

All eyes continue to focus on next Wednesday’s Fed statement and what details will be released regarding QE2.  Goldman Sachs issued a forecast today calling for the Fed to buy up $500 billion of US-Treasuries over the next 6 months.  A figure north of $500 billion and/ or a timeframe shorter than 6 months would likely cause rates to fall and vice versa.

Current outlook: floating