Mortgage rates are better today.
The bond market finally reacted to technical trading patterns yesterday and mortgage rates have improved. Since Wednesday’s close mortgage-backed bonds (MBS’s) have improved by 125 basis points.
Also helping rates is a flight-to-quality trade prompted by news out of Europe. Overnight Moody’s rating agency downgraded Ireland’s credit rating by 5 notches. This news has prompted risk-averse investors to invest in US debt securities; helping to push yields lower.
Although rates are better in the near-term the longer-term trend is not working in our favor. President Obama is expected to sign legislation today extending the Bush-era tax cuts AND instituting a new payroll tax deduction for workers. This bill is expected to cost the US Government over $800 billion in the next 10 years and encourage economic growth in 2011. Both outcomes are not interest rate friendly.
Current outlook: short-term float, long-term lock