Mortgage Rates Historically Low, But Can it Last?, June 9, 2010

Mortgage Rates Historically Low, But Can it Last?, June 9, 2010

Mortgage Rate Trend Direction        Neutral/Up

Economic Reports/Rate Impact      Federal Reserve Beige Book, 2 PM ET, Low Rate Impact

Key News                                           European Currency and Debt status, Bernanke testimony

Summary

Each new day lately brings the same question “Can we hold these all-time low rates?”  Today is no different as analysts look at fresh data and news and seem unclear of a sustainable direction for either stocks or bonds.  Since mortgage rates tend to move in opposite direction with stock prices and follow strength in the bond market, the recent ups and downs in these markets have been mirrored in mortgage rates.  Yet the changes have all been within a relatively small range.  The question we ask each morning going forward should perhaps be “Is today the day we break out of the range?”  Well is today that day? Probably not.  Changes in rates will likely occur, but they are not likely to move significantly—based on what we know now.

Early stock trades are slightly positive and bond prices are flat.  Rates are likely to be kept near current levels by lenders at their initial pricing this morning (9:30 AM—10:00 AM).  Testimony by Federal Reserve Chairman Ben Bernanke will be watched carefully for his opinions on the direction of interest rates, as well as, the impact of the European debt and currency issues.  The Federal Reserve will also release its so called “Beige Book”, a look at economic activity in 12 Fed regions around the country.

Impact of economic data released today

Most observers expect Chairman Bernanke to say the US Economy will continue to strengthen, but not rapidly.  He is also expected to say that European debt and currency issues will likely be successfully dealt with by the countries that make up the European Union. As always, anything Mr. Bernanke says regarding the Fed’s intention to raise interest rates can move the markets.  While the Beige Book is not a major influencer of mortgage rates, expectations are for evidence of economic growth in most of the regions of the US.

Impact of international or political events

European and Asian markets have not produced any news that is likely to move US markets today.  China released data that showed a dramatic increase in export activity, which could be an indicator of economic strengthening around the world.  Strong economic growth is associated with increasing mortgage rates.  Chinese news and data will be important to watch.