Mortgage Rates Went on a Wild Roller Coaster Ride Today

Mortgage rates went on a wild roller coaster ride today as the markets started off soft and then reversed itself with geo-political issues overseas.  The most prevalently-quoted conforming 30yr fixed rate for flawless scenarios remains at 4.25%, but 4.125% is still be courted with additional fees.

Following the bouncing ball is always a walk on the wild side.  After the US dropped bombs in Iraq this morning, and again this afternoon, and earlier this week Russia moving another 20K troops to the Ukraine border, the run to treasuries sent the 10yr to its lowest level this year this morning. This afternoon reports out speculating Russia is backing off a little. It took a few hours but when it sank in and gained momentum the 10yr note came off its low last night at 2.38% to end the day and week at 2.42% and MBS prices fell from +18 bps to -9 bps by 3:00pm. That is what volatility feels like, and in the end it is just one more news flash and speculation.

The other global angst is Iraq being overrun by Islamic State militants. The U.S. sent supplies and dropped a couple of bombs on what is described as an abandoned artillery site. The mid-east so far is no Ukraine/Russia episode as the President has repeatedly said no ground troops will be involved. Iraq just lost a huge cache of US weapons to the militants in the latest round of attacks by the Islamic State, the government looks hopeless. The way it appears now, all of the US lives lost in Iraq over the last 20 years have been a waste of humanity.

We have noted that market volatility would increase now – with today being a prime example as traders grabbed onto anything that deviates from the last hour.  At these low interest rates there is little patience when it comes to holding long bond positions. Next week we may be back to increased tensions between Russia and Ukraine; because one or two comments talked about de-escalation of tensions doesn’t hold much water unless there are continuing improvements. It is intriguing that on any positive news the markets flip, not in itself unusual under these kinds of situations -  but when stock traders come up for air with comments that the geo-politics isn’t a major cause for the stock market’s recent decline on a strong rally today it indicates not a lot of confidence in much these days. This morning those same traders were all about geo-politics.

Next week of course geo-politics will still be out there. Treasury will auction 3yr, 10yr and 30yr notes and bond in the quarterly refunding. The auctions, especially the 10 and 30 will provide additional information about demand. Economic reports will return and there are a number of Fed officials speaking.

In summary, our early rate improvements evaporated quickly this afternoon as Ukrainian Drama appeared to wane. Gains based on geopolitical strife can vanish (or appear) quickly, and it's important to take that into account. Buyers within 30 days of closing may want to lock up their gains today. Those with an appetite for risk and time on their side might consider continuing to float, as long as they understand both the risks and rewards.

Remember, if you want to know the benefits of locking your rate today versus floating, simply give me a call at 314-744-7806 or visit me on my website at www.CallTheMoneyMan.com. I have access to real time Wall St. data and instant market alerts with breaking news that I monitor throughout the day to assist us on making the informed decision.