The lion's share of the European debt crisis, a slowing domestic economic picture, and the expected impact of the credit market intervention plans of the Fed are already well priced into the mortgage market. From this point forward it will take massive amounts of even more dismal news and events to support steady to fractionally lower mortgage interest rates - but the slightest glimmer of improving economic news will trend to nudge rates higher and at a fast pace!
Fed Chairman Bernanke, speaking to members of a bipartisan congressional panel earlier this morning, said the Fed is prepared to take further steps to help a fragile economic recovery get back on its feet. Bernanke urged lawmakers not to cut spending too quickly in the short-term to avoid creating even more drag on the economy as it attempts to recover from the deepest most sustained recession since the Great Depression. The more aggressive the efforts to revive economic growth -- the more hesitant mortgage investors will become in terms of pushing rates notably lower.
A bill circulating through Congress aimed at forcing China into letting its currency rise is increasing the potential of a trade war between the U.S. and China. Lawmakers want to slap duties and other restrictions on imports from China and other countries found to be subsidizing their exports by undervaluing their currencies. Adopting protectionist measures against one of the largest financiers of American government debt may cause greater problems than it is intended to resolve. Mortgage investors are going to watch developments very carefully here. Should a major buyer choose to leave the market - the upward pressure on rates will increase notably.
As always...stay tuned,,,
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