Mortgage rates held their ground yet again, and are finally starting to look resilient after a relatively sharp move higher over the past 2 weeks. The stock market was having a little trouble this morning, down 130 points on the DJIA and the NASDAQ was leading the way lower. The obvious news that most believe, that the key indexes are excessively overbought. Been the case for three months as the indexes continue to make new all-time highs and market bulls touting another 1000 points for the DJIA. The bond market took the baton and rallied driving the MBS prices higher. Was this the beginning of the anticipated correction?
This afternoon North Korea added some fuel accusing the US of declaring war on the isolated country. The North Korean Foreign Minister said in a statement at the United Nations that Trump’s tweets over the weekend were tantamount to a declaration of war. Of course, he did not and the White House, also of course, denied and called it “absurd”.
This morning, and in many other reports that there are that need to occur if we could expect lower interest rates - North Korea and/or a sizeable sell-off in stocks. We had both today but market reactions suggest investors took either very seriously. We did get headlines from NK and occasional selling in stocks, maybe getting desensitized to both of the one-off barbs between Trump and NK and at current levels a few down days in the stock market is not cause to panic - yet.
The bellwether 10yr note yield generally held its low yield at 2.21%, MBS prices increased this morning and for the most part held the gains well. We think this is nothing more than a technical rebound after the rate markets increased almost daily the last 10 sessions. I have continued to state that the rate markets are due for a minor correction, however no one can predict when this will happen.
I am not expecting follow-though in the bond market tomorrow unless more selling continues in stocks. Janet Yellen will speak at 10:50 tomorrow morning in Cleveland. More than likely this will temper opening prices in the morning. Also, tomorrow two key data points, August new home sales and the Sept Conference Board’s consumer confidence index.
In summary, today's rabid rant from North Korea's foreign minister ("US declared war on North Korea") helped push rates lower as of early PM trading. There is no guarantee these gains hold (or compound) without additional drama, we'll see what the rest of today brings. Floating borrowers should definitely consider locking.