Mortgage Rates Head Down After Holiday, September 7, 2010

Mortgage Rate Trend Direction:    Down

Economic Reports/Rate Impact:   No Economic Reports Released Today

Key News:                                          European Bank Issues

Summary

Just Friday I made a bold prediction that the lowest rates have come and gone.  Well, today mortgage rates may be headed back down near those record lows.  As I mentioned, several things could make this prediction wrong.  The first item I mentioned was a new "bank crisis".  Low and behold, this morning we are hearing reports of serious issues with the European banking sector.  Consequently, stocks are down in early trading while mortgage-backed securities have spiked higher.  I expect mortgage rates to drop at initial pricing this morning, yet I would not be surprised to see a reversal during the day.

Impact of economic reports

With no reports due out today, markets will be seeking guidance from other sources.  Tomorrow the so-called Fed Beige Book, a review of economic activity in the 12 Federal Reserve regions will provide some guidance.  Thursday gives us trade balance figures and initial jobless claims.  All-in-all this short week is light on data and will probably see markets staying in a fairly tight trading range.

Impact of international or political events

A report in the Wall Street Journal, casts doubts on the comprehensiveness of the recent European bank "stress" tests.  The article suggested that many banks excluded certain sovreign debt holdings which could prove quite negative for their overall strength should the value of these debt holdings drop.