When analyzing the charts, it looks as if mortgage rates may bounce higher in the next few weeks.  The 10 year treasury rate has been in a steady downtrend since it reached 4%.  The pullback has brought it all the way back to 3.5% but it looks like there is support at the 50 dma at 3.4%.  If this level holds as support, look for the 10 year to bounce and move a bit higher as it is highly oversold.  If this downtrend is broken to the upside, look for the mortgage rates trend to do the same thing.

It will be very interesting to see if the government offers more bonds up for auction to keep interest rates low.  About two weeks ago I mentioned that this would push mortgage rates lower and that is exactly what happens.  Unfortunately, the government is going to run out of options if they keep pushing this country further and further in debt.  With that being said, it would not surprise me at all to hear Ben Bernanke announce that the Federal Reserve Bank is going to buy back billions more in Mortgage Backed Securities.  A few days after that we are likely to hear Tim Geithner announce another plan to auction off bonds.  All of this is going to push mortgage rates lower, but how long will artificial mortgage rates last.

Low mortgage rates are great for home owners, but eventually all of this debt is going to come back to bite the government in the ass.  I sure hope that our President and his staff have a damn good solution to get out of the trillions of dollars in debt we are already in.  Ultimately, this is going to hurt the housing market in the long run, but obviously the elected leaders don’t care about that right now; they just want mortgage rates to be as low as possible.