Will Mortgage Rates Be-Witched?, June 18, 2010

By:: David Coster - MortgageLoan.com

Mortgage Rate Trend Direction Neutral/Up

Economic Reports/Rate Impact No economic data of significance released today

Key News Quadruple Witching, European Debt Crisis

Summary

The third Friday of June will be an interesting day to watch the markets. With no economic reports being released today to guide the markets, news and market technical issues are likely to provide direction. Based upon early market activity in the US and the activity in Asia and Europe, mortgage rates will likely open flat with some upward pressure possible.

Impact of “quadruple witching”

Today is one of only four days all year when market index futures, market index options, stock options and stock futures options all expire simultaneously. These products are used as hedges, or what amounts to insurance, against the possibility that the investments made were poorly chosen. When these products expire it can cause greater volatility in the market and higher volumes of shares being traded. Most analysts expect tomorrow’s event to be modest, with increased volume but not extreme market swings. The last hour of trading (3:00 PM ET to 4:00 PM ET) is known as the “quadruple witching hour” and it is when the biggest impact is expected. The bond market tends not to react to the ups and downs of this technical market event.

Impact of international or political events

The positive auction of Spanish debt earlier in the week and the subsequent rise in the value of the euro currency against the US dollar has calmed the immediate concerns about potential defaults by European nations. Markets in Europe and Asia are mixed today. Unless there is new information coming from foreign markets during the day, no significant impact on US mortgage rates is anticipated.

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Loan Type	Today	+/-
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