Mortgage Rates Went Up Today

Mortgage rates went up today after we got our first dose of employment data this morning and it was much better than expected.  The most prevalently quoted conforming 30yr fixed rate for ideal scenarios, moved upward towards 4.375% with a rebate, but 4.25% was still available.

The interest rate markets increased and rattled any bullish bias on either technical or fundamental outlooks. That is today, two weeks ago it was all about a slow growth economic outlook with 2014 GDP being edged lower. Now the outlook for growth has increased and with it the fears of inflation have heated up. On one hand we all want growth, on the other markets are shaking with concern that a better economic outlook may not be a good thing because as interest rates increase mortgage rates will increase, the cost of living will increase and all those low paying new jobs won’t be able to spend as prices rise. Whether or not any of it actually happens, markets are about as confident as a man going over Niagara Falls in a barrel.

Factory Orders were projected to pull back -0.3% and they came in lighter than that at -0.5%. But that was only because the prior period was revised upward to show an even stronger reading - so it was a wash.

In regards to Yellen and the IMF, in her speech she gave a defense of the Fed's policies but offered nothing really new that would swing MBS pricing. Our benchmark MBS was trading at a negative 21BPS at 10:00 CST when her prepared statement was released and an hour later were still the same. 

In summary, rates fell significantly in January, leveled-off in February and took choppy steps higher in March. From there, they settled into a flat range mostly consisting of 4.25 and 4.5%, but with occasional forays to 4.125 and 4.625%. Unless you are a big risk taker, I would recommend to lock at these levels.  The ol’ cliché “Pigs Get Fat and Hogs Get Slaughtered” is a saying that cannot be ignored.  Bond market closes at 1:00PM CST tomorrow.