Rate Update May 11, 2010

Mortgage rates are unchanged.

What a difference a day makes.  Yesterday the markets were enthusiastic following the EU’s nearly $1 trillion bailout announcement.  Traders thought that all would be fine and I shifted my outlook to ‘locking’ thinking that the “flight-to-quality” trade would unwind.

Today there are renewed fears that the EU’s bailout plan will not be enough to stave off the fiscal crisis from spreading AND over the long-term implications this package has on creating a moral hazard for other EU countries to overspend.  The renewed fears are helping mortgage rates in the US to remain low.

Later today the US Treasury will auction $38 billion in 3-year notes.  I expect demand for the auction to be strong but if it is not we could see rates move higher.  Attention remains focused on Greece.

Current outlook: neutral