Monday, May 11, 2009

The Fed is definitely making their presence felt in the Treasury market this morning.

The Fed is actively buying Treasury obligations maturing in 15- to 30-years. Today's Fed operation is part of its ongoing $300 billion plan to purchase government debt to help keep borrowing cost artificially low, giving the economy the opportunity to fight its way out of a major recession. That is good news. The even better news is that Mr. Bernanke has plans for an encore performance in the Treasury market tomorrow. For the time begin, expect these Fed buying sprees to limit any significant upside pressure on mortgage interest rates.

Selling pressure in the stock market is contributing to solid improvements in the mortgage market in today's early going. An increasing number of analysts are warning the rally in stock prices that began in early March is overdue for a correction to the downside. Should these forecasts prove accurate; a meaningful sell-off in the stock markets will almost certainly support the prospects for steady to perhaps fractionally lower mortgage interest rates.