Mortgage rates stabilized after a three day rise, last Friday. All eyes will be on The Ben Bernanke Alchemy Show, this Wednesday. He has to convince markets that his policies won't be inflationary. I actually think he can pull it off. While I'm appalled at how the Fed has doubled the money supply (M1) in the past eight months, they may have pulled off an interesting arbitrage play:
Issue debt at 3.5%-4.0% (Treasuries) and buy debt at 5.5%-6.0% (Mortgage-Backed Securities). In a rising interest rate environment, that could be a well-hedged trade...
...if Americans make their mortgage payments.
Just food for thought. There are no big economic numbers coming out prior to Wednesday so I don't expect my absence today, as I attend the Gravity Summit, will cause the mortgage rates market to collapse. My partner, Sean Purcell, has his hand on the tiller today and you can reach him at (619)-270-8666.
I'll leave you with two stories that make me think that higher mortgage rates, expected in 2010, won't come until 2010:
Traders may have already overpriced the prospect of inflation into treasury yields. Essentially, treasury yields may be at the expected 2010 levels right now, and not reflective of the weak economy of today.
I WANT you to float your mortgage rate until we hear what Wizard Ben has to say but I'm awfully worried about volatility. I feel a 5% par mortgage rate "in my bones", sometime this summer but my mojo ain't gonna pay your mortgage if my gut feeling is wrong. Keep locking all mortgage rates at application until hear from Wizard Ben on Wednesday. If the mortgage rates market dramatically shifts downward, we'll be able to renegotiate rate locks with our lenders.
