RATES NUDGE UP:
  30-YEAR FIXED 15-YEAR FIXED 1-YEAR ARM
This week’s rate: 5.90% 5.21% 4.09%
Change from last week: +0.01% +0.03% -0.04%
Monthly payment: $889.70 $1,202.66 $723.93
Change from last week: +$0.95 +$2.36 -$3.48

The war in Iraq is looking up, the economy is looking down and mortgage rates are about the same.

The benchmark 30-year fixed-rate mortgage remained virtually steady, rising just 1 basis point to 5.90 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.38 discount and origination points. One year ago, the mortgage index was 7.01 percent.

Mortgage rates tend to move in the same direction as yields on 10-year Treasury notes, and Treasury yields did not move much in the last week. The 10-year Treasury yield closed at 3.92 percent April 2 and closed at 3.94 percent Tuesday.

Some analysts guessed that investors were standing by, waiting for the war to conclude. But that’s not how Wachovia economist Matthew Ellis sees it. He notes that currency markets have stopped swinging wildly up and down according to war news. “Perhaps the markets are finally looking past the war and focusing on economic fundamentals once again,” he says.

As the war in Iraq winds down, investors will pay increasing attention to what’s happening with the economy. It doesn’t look encouraging.

Corporate earnings season is getting under way, and the outlook is mixed. Both the manufacturing sector and the larger services sector shrank in March. Some 357,000 jobs disappeared in February and another 108,000 jobs disappeared in March. That’s not the number of people who filed unemployment claims (a number that is partially offset by people who are hired). It’s the number of jobs that have disappeared from the economy.

Or is it? National City economist William Natcher notes that 210,000 military reservists were called up for duty in March. The Labor Department counts that as 210,000 lost jobs because its payroll figures don’t include active-duty military personnel. Of course, called-up reservists have jobs. They’re just not counted by the Labor Department. Perhaps there actually was an increase in jobs in March.

Reacting to the contradictory, sometimes foreboding economic news, traders at the Chicago Board of Trade have priced in a 36 percent probability that the Federal Reserve will cut short-term interest rates on or before the rate-setting committee’s next meeting scheduled for May 6.

The Chicago Board of Trade is a fairly accurate barometer of Fed sentiment, so chances are that the Fed will hold short-term rates steady next month.

Rates on 15- and 30-year fixed mortgages don’t respond directly to the Fed’s changes in short-term rates. But with the economy behaving sluggishly, there’s little reason to believe that interest rates are heading substantially upward anytime soon.