Mortgage Rates Continue to Move Upward

Mortgage rates continue to move upward after seeing a downward trend for much of last week. Nearly all of that improvement has been erased and rates are now in line with the afternoon following the FOMC Announcement on March 19st. That leaves today with the second highest rates since January 9th. That leaves the most prevalently quoted conforming 30yr rate for top-tier scenarios at 4.5%, and fast approaching 4.625%.

Mortgage rates are most directly informed by Mortgage Backed Securities (MBS), which tend to trade with a high degree of correlation to US Treasuries. The stock market did its usual swoon again today, opening strong with the bond and mortgage markets opened soft this morning with the US Stock market trading higher.  Then Janet Yellen spoke at a conference in Chicago and treasuries and mortgages improved and some additional improvement in stocks as a reaction.  The good/bad news is Yellen continued to downplay the strength of the economy and said the economy still requires plenty of support from the central banker. When is bad news good news?  When the Fed talks about continued support with low interest rates.

Volatility hurts mortgage rates every bit as much as falling prices in bond markets (as prices fall, yields--or interest rates--rise), and more could be in store by the end of the week. The focal point for the volatility will be Friday morning's all-important Employment Situation Report. It collides head-on with a rate environment that has been exceptionally sideways in the bigger picture. In other words, rates may be near their 2-month highs today, but the range over that time has been 4.375 to 4.5 for the most part. After extended periods of sideways movement in any financial market, there's more risk that the first departure from the range is bigger than normal.

In summary, there is a lot of data out this week that will affect bond yields and pricing.  Floating could be very risky especially after Weds ADP report leading into Friday’s jobs report.