Mortgage Rate Update, June 10, 2011

Mortgage rates rose yesterday following a strong “traders day” for the stock market.  Occasionally, when a market has been headed in one direction for a period of time but begins to find resistance to further moves in that direction, traders will begin to take the other side trades and push the market in an opposite direction.  This simply happens because traders get paid based on the volume of trades.  Yesterday was such a day.  Today is not.

Mortgage Rate Trend Direction:     Down/Neutral
Economic Reports/Rate Impact:     Import Prices, 8:30 AM ET, Moderate Rate Impact
Key News:                                             China’s Exports, Germany Votes for Greece

Summary
Unlike yesterday, actual economic data and events will drive the markets today.  Import price was expected to show lower prices for imported good in the US.  This would be a positive sign for stocks. On the negative side, data showing weakness in exports from China was also released.  The expression “when China’s economy catches a cold, the global economy gets sick” seems to fit.  I expect rates to modestly improve initially today as traders focus seems to have reverted to signs of slowing economic growth.  But as is typical rates on Friday afternoon will likely head back toward neutral. Time for a Dramamine!

Impact of economic reports
Import prices were expected to show a decline this morning for the first time in quite a while…however, the report issued at 8:30AM ET, showed another increase.  Obviously inflation in prices can quickly turn into inflation in mortgage rates.  However, early results from mortgage-backed securities trading still indicate lower rates today.

Impact of international or political events
Exports from China declined this month while imports soared.  It seems reasonable to think that this should be good news for economies around the world as they are selling goods into China.  However, China is such a significant part of the global economy that any weakness is for China is perceived as a sign of future weakness for everybody else.

Germany's Parlament voted to approve bailout funds for Greece today.  This will likely take this issue off the front burner of economic concerns--but only temporarily.