Mortgage Rates See No Change After Volatile Day
Mortgage
rates remained basically unchanged after
another volatile day. Bond markets (which set the tone for mortgage pricing)
lost some ground overnight and remained under pressure after the morning's
economic data beat expectations. In general, stronger data suggests higher bond
yields (which correlate to mortgage rates) and stock prices. While both did, in
fact, move higher at 9am, there was some relief in the afternoon. For ideal
scenarios, the most prevalently quoted conforming 30yr fixed rate remains at 4.25%
with 4.125% still getting some play with extra fees.
This afternoon the stock market dropped on a news release that the Polish Foreign Minister commented that Russia was preparing to invade Ukraine. It doesn’t take a lot these days to rattle the equity markets. Technically bearish, fundamentally fearing the Fed will begin increasing interest rates sooner than is currently thought because recent key economic reports have been better than economists were predicting—today’s ISM services, last week’s ISM manufacturing, as well as employment Q2 preliminary GDP and a few other reports.
Some moves to treasuries on safe haven buying but there wasn’t much. Ukraine/Russia is not new. It is a situation that markets will continue to track closely but keeping it perspective, the 10yr treasury note has gone nowhere since early July, trading in a range and no matter what has been thrown at it the 10yr cannot break 2.44%. That rate is the brick wall, so until (if) it is penetrated, regardless of the ink and media coverage that many times over-hypes any story, especially geopolitical news, traders will shy away. Anticipating lower rates from these present levels is pushing on a string. It is going to require a much unexpected event to push yields down below 2.44% on the 10yr.
Not much on the calendar tomorrow - I am going to change the slightly bullish outlook for the near term. For a few weeks I have tilted more to the bullish bias because the price action has held most of the momentum oscillators and moving averages in positive positions. I have recommended floating numerous times and have benefited little with the 10yr trading at its very solid resistance. Now it is time to accept the fact that here is little reward in floating. The risks of doing so are increasing. If the 10yr crosses 2.44% in a decisive move I will jump back in. It is a day to day decision right now the risk/reward tilts too much on the risk side of the equation.
In summary, after a data packed previous week, there isn't much of significance scheduled for the rest of this one, after ISM this morning. Rates started the day in the hole but rallied throughout the day, and I think if there is any directional momentum, even if very little, it's towards lower rates the next few days. However, it is the old saying that Pigs Get Fat and Hogs Get Slaughtered – if you float be cautious!
This afternoon the stock market dropped on a news release that the Polish Foreign Minister commented that Russia was preparing to invade Ukraine. It doesn’t take a lot these days to rattle the equity markets. Technically bearish, fundamentally fearing the Fed will begin increasing interest rates sooner than is currently thought because recent key economic reports have been better than economists were predicting—today’s ISM services, last week’s ISM manufacturing, as well as employment Q2 preliminary GDP and a few other reports.
Some moves to treasuries on safe haven buying but there wasn’t much. Ukraine/Russia is not new. It is a situation that markets will continue to track closely but keeping it perspective, the 10yr treasury note has gone nowhere since early July, trading in a range and no matter what has been thrown at it the 10yr cannot break 2.44%. That rate is the brick wall, so until (if) it is penetrated, regardless of the ink and media coverage that many times over-hypes any story, especially geopolitical news, traders will shy away. Anticipating lower rates from these present levels is pushing on a string. It is going to require a much unexpected event to push yields down below 2.44% on the 10yr.
Not much on the calendar tomorrow - I am going to change the slightly bullish outlook for the near term. For a few weeks I have tilted more to the bullish bias because the price action has held most of the momentum oscillators and moving averages in positive positions. I have recommended floating numerous times and have benefited little with the 10yr trading at its very solid resistance. Now it is time to accept the fact that here is little reward in floating. The risks of doing so are increasing. If the 10yr crosses 2.44% in a decisive move I will jump back in. It is a day to day decision right now the risk/reward tilts too much on the risk side of the equation.
In summary, after a data packed previous week, there isn't much of significance scheduled for the rest of this one, after ISM this morning. Rates started the day in the hole but rallied throughout the day, and I think if there is any directional momentum, even if very little, it's towards lower rates the next few days. However, it is the old saying that Pigs Get Fat and Hogs Get Slaughtered – if you float be cautious!
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