Rate Update February 17, 2010

Mortgage rates are currently unchanged from yesterday despite a weaker open in the bond market.

Mortgage-backed bonds have opened lower this morning, which will put upward pressure on rates, because of worse than expected inflationary data and technical trading patterns.

The Labor Department reported this morning that year over year import prices increased by over 11% in January.  The large increase was mainly due to higher oil prices as a result of a weaker dollar.  In a separate report the Federal Reserve reported that capacity utilization and industrial production both increased by more than expected.  Both of these reports add to inflationary concerns.  Now that an economic recovery is widely expected investors are easily spooked over inflationary data which is bad for mortgage rates.

Later today the Fed will release the minutes from their January 28th monetary policy meeting.  This release always has the ability to impact the markets.

From a technical perspective mortgage rates continue to remain within a tight range of 4.875%-5.00%.  We remain concerned about a “break-out” where mortgage rates move sharply higher.  However, we have yet to see a catalyst that would create such a move.

Long term risks still favor locking but as long as we’re in this range there doesn’t seem to be any urgency.

Current outlook: neutral