Rate Update September 24, 2010

Mortgage rates are worse this morning.

The markets were greeted with two bits of positive economic news this morning.  First, a research institute in Germany reported that a closely watched business sentiment index rose by more than expected easing fears that the European economy was headed for a double-dip recession.

Second, the US Commerce Department reported that durable goods orders, excluding airplanes and cars, rose by much more than expected.  This report is providing optimism for investors and stocks are trading sharply higher.

When stocks trade higher it is often not a good sign for mortgage rates and today mortgage-backed bonds are trading lower; pushing yields higher.

Let’s remember that rates dipped earlier in the week on the expectation that the Fed would engage in treasury security purchases in November.  However, the Fed has yet to commit such action.  Positive economic data from now until their next meeting in November will lessen the likelihood of them taking further quantitative easing that would help rates.

Current outlook: neutral