Today’s Market Update Friday May 22, 2009 10:48 am ET

Current Trend Direction: Sideways

Risks Favor: Very Carefully Floating

Current Price of FNMA 4.00% Bond – 99.62 +9

30 Year Fixed Rate
4.375% APR 4.57%

30 Year jumbo Fixed Rate
5.125% APR 5.23%

5/1 Jumbo Arm
4.50% APR 4.61%

7/1 Jumbo Arm
4.75% APR 4.70%


Mortgage Bonds are near unchanged, but well off the highs seen earlier in the day.
Yesterday Mortgage Bonds got hit with a one, two punch, which pressured prices lower and mortgage rates higher.

First- the Treasury announced they are going to sell $162B worth of Bonds next week. That is a lot of paper that has to be absorbed by the market. That additional supply will hurt Bond prices, making it difficult for them to move higher. This is what happens when the Government has to issue all this debt to pay for the massive stimulus programs.

Then, Pimco’s Bill Gross basically said, the US will eventually lose its AAA credit rating. Even though he did not see that happening any time soon, his comments spooked the markets into a further sell off.

The New York Federal reserve purchased another $25B in Mortgage Backed Securities from May 14 through May 20, bringing the year-to-date total to $482B, out of the $1.25T that its has been allotted. Rates can’t improve much further unless the Fed goes in and buys significant amounts of 4 to 3.5% Bonds.

Hopefully you protected yourself by locking into a rate before yesterdays sell off. If not, let this be a lesson in trying to time the market. So, be sure to lock in if and when these interest rates move down again.

The Bond Market will close early at 2:00 pm today and will be closed Monday in observance of Memorial Day.