Mortgage rates are mostly unchanged from yesterday despite a sell-off in mortgage-backed bonds in the afternoon.
The major story today is the Fed’s record auction of 2-year notes. The Fed will sell $43 billion of them later this morning. The additional supply of fixed income securities will compete with mortgage-backed bonds for investment dollars. Should demand for bonds be strong we’d expect mortgage rates to remain low and vice-versa.
Threatening the demand for bonds today is that fact that Japan is celebrating a national holiday.
The Fed begins a two-day meeting on monetary policy today. Tomorrow they are expected to leave short-term interest rates unchanged. What we’ll be listening for are any comments relating to the Fed’s TALF program and whether or not they will use the remaining $200 billion to purchases mortgage-backed securities or not. If they indicate that they will not this would almost certainly cause rates to rise.
Current outlook: locking bias