Mortgage Rates Seek Direction, June 22, 2010

Mortgage Rate Trend Direction Down

Economic Reports/Rate Impact Existing Home Sales, 10 AM, Moderate Rate Impact

Key News Chinese Currency Valuation, European Debt Issues

Summary

Yesterday’s early morning rise in mortgage pricing had reversed by the end of the day. Expectations were that the Chinese government’s decision to allow its currency (the Yuan) to fluctuate against the US dollar. However, mixed messages from Chinese officials caused concern about the sincerity of China’s intentions. Today begins with modestly lower stock prices in Asia and Europe.In the US stocks opened higher but quickly gave back their gains after the Existing Home Sales report was released.. A drop in mortgage pricing is expected at initial lender pricing this morning (9:45 AM ET-10 AM ET). As is the rule however, the news of the day may move mortgage pricing in either direction.

Impact of Economic Reports

Existing housing sales figures for the month of May will be released by the National Association of Realtors. Expectations were that sales grew at a healthy annual rate in May over April. However, the actual figures showed a surprise to the downside. This should help mortgage rates as it is an indication that the US economy still has a great deal of weakness.

Impact of international or political events

Yesterday US stock markets reacted to the Chinese statement that they would allow the Yuan to appreciate against the US dollar (making US products cheaper in China) by rallying. However, when the Chinese Central bank began buying US dollars it served to counteract the impact of the stated policy and gave rise to great concern about China’s true intentions. Activity by China today can move mortgage pricing.

Similarly in Europe, comments from government officials regarding the on-going debt crisis could move stock pricing during the day. Some positive news emerged: the British government announced proposed tax increases, a report indicated that German borrowing needs may be lower than previously thought and a ratings agency stated that Spanish banks were stronger than analysts had thought..

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