Mortgage Rates Fell Moderately Today

Mortgage rates fell moderately to begin the week, but have not yet returned to recent lows.  Even  with the improvement the past few days, and a sigh of relief after battling the outside forces trying to push the rates higher, much volatility awaits us the rest of the week.   It is not safe to assume that rates will continue to fall in the short term.

The key today for the global stock markets has been more stimulus may be coming out of China. The reaction is strengthening the dollar and crude oil has been swinging back and forth all session but will end about unchanged. The bond market finding enough support from personal spending and the dollar strength - enough support to just keep rates unchanged on the day. Central banks are buying large amounts of US treasuries, according to data the amount is in the trillions. The bond rally’s gotten its latest boost from Federal Reserve policy makers who have said they would be slow at raising benchmark interest rates quickly, even as they plan for their first rate hike this year.

Tomorrow two key reports and the January Case/Shiller 20 city home price index.   March Chicago purchasing managers index is expected to be higher from a very weak reading in February.  We will also see March consumer confidence from the Conference Board which is expected to decline from the last reading, but if it is too weak, that read will be a plus for the bond market but depending on what the currency markets and global equity markets do. Also tomorrow, the IMF is scheduled to release figures on global foreign-exchange holdings for the fourth quarter of 2014 the data is likely to show central banks piling into the dollar and lightening up on the euro.

Treasuries and MBSs remain slightly bullish based on our technical data. Fundamentally though most of the data and news that impacts rate markets is overall flat or neutral.   Some data looks good, some does not, keeping the Fed in play with its continual comments that are meant to confuse, the Fed is as uncertain about the economic outlook as is everyone else. Yes, there are the roaring bulls that get a lot of ink and media coverage but behind all of the bullish comments there is uncertainty, as the volatility clearly indicates.

In summary, mortgage bonds held their own today in the face of a huge equity rally. Normally such a large increase in stocks would create selling in mortgage bonds but that was not the case today. Mortgage bonds however were not able to push above tough resistance and until that happens floating can be dangerous. Take into consideration your risk tolerance and if risk adverse there is enough market moving data to make your stomach turn. Those who can tolerate large market swings and more importantly are not closing for 30 days out or longer can consider floating.