Mortgage Market Update as of Wednesday, November 7th

GOOD Hump Day TO ALL! 

Bonds are closing out today flat, currently at ZERO, so there wasn't a change in mortgage rates today. 

Stocks were punished this morning.  Leading the way down was a nasty earnings report from General Motors (GM), who announced a shocking third quarter loss of $39 Billion, which included significant mortgage related losses generated by GMAC, GM's former financial company.   

The big news of the morning was China announcing they may diversify their holdings away from the US Dollar.  Statements from Chinese officials included "We will favor stronger currencies over weaker ones, and will readjust accordingly.  The US Dollar is losing its status as the world currency."  As you know, we have anticipated this happening for a very long time, and have reported our thoughts on this to you in many prior Updates and seminars.  For China to reduce its massive US Dollar denominated holdings, they must sell off some of their enormous US Dollar based positions, like our Mortgage Bonds.  Going forward, they also may not purchase as many of our Mortgage Bonds.  The massive demand for our Bonds by the Chinese is one reason rates have stayed relatively low in recent years - so this scenario is not good for Bonds and home loan rates in the long term.

Additionally, Oil is now trading near $98 a barrel and this also won't be good for Bonds longer-term as high energy prices are inflationary.  We are watching Oil as it approaches a psychological resistance level of $100.

Technically, Bond prices are now trading below the 25-day Moving Average and just above important support at the 50-day Moving Average, presently at $100.39.  The Bond hasn't closed below the 50-day MA since late July, so a close beneath this level would be negative for Bonds.  For now we want to be patient and see if the Bond can remain above the 50-day Moving Average.  So for now, we will Cautiously Float, but be ready to lock if the Bond breaks below this floor of support.

As of today, we are still offering 6.5% for a 30-year fixed, no points.

Make it an AWESOME day!

Santos