Low Mortgage Rates Stick, July 9, 2010

Mortgage Rate Trend Direction:   Neutral

Economic Reports/Rate Impact:   No official reports released today

Key News:                                    China Currency Value, European Debt

Summary

Yesterday was typical of many lately, in that we saw mortgage pricing bounce around, yet they ended up sticking pretty close to opening levels. With no economic data of any significance released today, the stock and bond markets will seek direction from comments made about China’s currency (Yuan) and comments by the president of the European Central Bank. Given the slow news today, mortgage rates are expected to stick to yesterday’s closing levels at initial pricing.

Impact of economic data released today

No data of importance is scheduled for release today. Next week is light on official data as well, but companies will begin to report earnings for the second quarter and issue guidance for their earnings for the second half of 2010. Mixed results are expected in earnings with generally lowered expectations for the balance of the year. If that comes to fruition it bodes well for mortgage rates holding current low levels.

Impact of international or political events

The US government issued a report on world currencies in which it did not say that China was a “manipulator” of the value of the Yuan. Critics of China believe that they have purposely kept the value of the Yuan lower than it would naturally be if market forces were allowed to determine its relative price to the US dollar. This helps Chinese exporters and hurts American firms trying to penetrate the emerging market in China. The US government report was believed to be a gesture of goodwill toward China in response to their recent commitment to allow the Yuan to rise in value. The Yuan has risen fractionally over the past month.

European Central Bank President Jean-Claude Trichet, made statements yesterday indicating that he did not believe that recently announced budget cuts by member nations would not lead to recession. He also said that the crisis with debt in the European Union was not over. As long as fears of economic collapse in Europe are prevalent, the impact should help to keep mortgage rates low.