Rate Update September 2, 2010

Pricing on mortgage rates are modestly worse this morning.

Mortgage-backed bonds (MBS’s) are under selling pressure again this morning which is threatening to push rates higher.  In a possible pre-cursor to tomorrow’s all-important monthly jobs report the Labor Department reported earlier that weekly jobless claims declined by more than expected.  This is good news for the economy but bad news for rates.  Should tomorrow’s jobs report come in better than expected (expectations are for 110,000 job losses and 40,000 private payroll growth) I expect rates to move sharply higher.

In the long-run though the economic outlook is still weak which is a good for mortgage rates.  Should rates move higher tomorrow I expect them to remain higher for a couple weeks.  Eventually though the reality of our present situation will sink back into the markets and I think we’ll see rates test lows again.

Later today the US Treasury is set to announce the size of their 3-year, 10-year, and 30-year bond auctions for next week.  Analysts are expecting $67 billion to be announced.  Click HERE to understand how this could impact interest rates.

For loans closing in the next couple weeks I am going to recommend a locking position going into tomorrow’s jobs report.

Current outlook: locking near-term, floating long-term