Rate Update October 30, 2009
Mortgage rates are slightly higher following yesterday afternoon’s sell-off in the mortgage-backed bond (MBS) market.
MBS’s sold off yesterday afternoon following a weaker than expected 7-year note auction on the part of the US Treasury. We had alluded to this in yesterday’s rate update which is why we had shifted to a “locking” position.
The bond market has recovered some of the losses this morning on weaker than expected economic data.
This morning’s Personal Income & Expenditure report from the Commerce Department showed that personal incomes remained flat last month while consumption expenditures decreased by .5% & personal savings increased to 3.3% (although the media makes this out to be bad news it can be argued that for the long-term sustainability it is positive news).
More importantly, the Personal Consumption Expenditure Price Index (PCE) showed that inflation pressure remains tame. Low inflation is good for mortgage rates.
At this point, MBS’s are in a tight trading range. For now, we’ll maintain a near-term floating position.
Current outlook: floating in near-term