My Mind on Mortgages

Mortgage rates are unchanged this morning.

As traders and investors await the 2nd quarter earnings season that kicks off tomorrow afternoon we don’t expect there to be a catalyst that would help mortgage rates move any lower.

Beginning tomorrow we’ll need to keep a close eye on the stock market for clues on how mortgage rates will move (click this link to understand how stocks impact mortgage rates).  Although different analysts have different opinions it seems as though the financial sector will have an especially important role in shaping expectations for the overall market.  If financial stocks report better than expected earnings then we would expect mortgage rates to suffer and vice-versa.

Working against mortgage rates are two factors.  First, there is more and more talk about the need for another round of government stimulus.  Given that the US Government is already working with record budget deficits another round of stimulus would further escalate inflationary fears and push mortgage rates higher.

Furthermore, the technical trading picture for mortgage backed bonds does not look favorable.  For now we’re going to pull back to a neutral position.

Current Outlook: neutral