Mortgage rates are teetering this morning as a debt and deficit deal appears closer in Washington.  However, as both Monday and Tuesday of this week have demonstrated, early morning trading in mortgage-backed securities (which determine mortgage pricing) is not necessarily indicative of the ultimate direction of rates for the day.  With only one minor economic report today, the bulk of attention will be paid to the negotiations in Washington.

Yesterday a small group of Republican and Democratic Senators announced that they have designed a framework for a deal to raise the debt ceiling and cut spending.  The proposed deal appears to have sufficient support to pass in the Senate with a 3.75 to 1 ratio of spending cuts to revenue increases.  Of course, it is the US House where there is potentially a roadblock from a large group Republican Members who have stated that they will not support any tax increases.  Passage of the compromise may come down to a calculation that shows that the tax cuts in the proposal actually exceed the proposed increases.  That can allow those Members pledging not to raise taxes to say that the bill actually lowers taxes when taken as a whole.

Existing home sales will be reported this morning.  Expectations are for a modest increase in sales for the past month.  If this result comes to pass it will be another indication that the housing market is making slow (perhaps painfully slow)progress, but progress nevertheless.  However, unless the result this morning is a big surprise, I do not expect any impact on current mortgage rates.

So what could happen today to move rates?  A definitive statement from Speaker of the House Boehner regarding the so-called “gang of six” proposal , could throw the market into immediate action.  Outside of that I would say that traders often take advantage of uncertainty to push and pull MBS prices simply to increase trading volume.  This is cynical, I know, but they are paid on each trade regardless of direction.

Similar Posts:

Share