Mortgage Rates Went On a Roller Coaster Ride

Mortgage rates went on the wildest roller coaster we have seen in a long time.  From the time the economic news started to pour out until the end of the day after the closing bell, the Mortgage Backed Securities covered more ground last seen in mid-2011 – but that covered several days, not a 12 hour period as seen today.  After all the smoke was cleared, the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios now somewhere between 3.875% and 4.0% depending on various fees -   even though earlier today there were quotes being given at 3.625-3.75%. 

I have listened to a lot of so called market experts today, I wonder where they were when they were 100% sure that interest rates were going to increase?   On days such as this, it is the biggest move in the 10yr note since Oct 1987, we get a lot of opinions, mostly confusing. The volatility today was extreme in the bond market - we saw quotes as high as +187 bps for MBSs and the 10yr note at one point in what we call fast markets declined to 1.85% (wonder who got that trade). Today is what traders had been looking for over a month.  Now that it is here markets are scratching their butts trying to assess what it means.  Until last week a sell-off like this was considered to be a buying opportunity, those same people today are not buying, wondering what happened.  Never ceases to amaze that what markets expect, when it happens it seems a shock.

The depth of the stock market slide, down 450 at its low, triggered massive margin calls and in turn exacerbated more selling. In the bond markets, the same thing; margin calls as those bears looking for higher interest rates were squeezed out. This was a near term capitulation for the rate markets. Tomorrow rates will be higher and stock indexes a little better. I heard one man saying the stock and bond markets are not joined at the hip, that is wrong and miss-leading. As stock indexes fall the interest rates will fall with them, it is a simple move from equities that are not making money, to the bond market that is making money now with price improvements.

The best advice I have is, don’t make any swift moves. Let markets settle down over the next few sessions; way too many opinions out there now, and very high level of emotions. Lenders that are selling mandatories are getting their skin peeled, a reason why MBS prices plunged so hard this morning---paring off trades.

In summary, what a wild day we had in the market!  If you have been floating and or waiting and watching for weeks or months, the only reason not to lock in at this time is if you have absolute proof rates are going lower and of course, none of us do. This is an unexpected surprise and I personally think taking all the positive gains is the best decision you can make.

Keep a strong look at the markets and continue to cautiously float if you do want to take a risk. 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.