Mortgage Rates Continue Higher

Mortgage rates continued higher at an unsettling pace today, following an exceptionally strong reading on Residential Construction data.  This particular report does not historically cause a lot of rate volatility, but it did continue today.  The world is as confused as I have ever seen it - will the Fed move and when? What impact will the ECB QE actually have on global growth and will it turn the EU economy around? How is China doing? (Not as good as what you may have heard or read). Is the US economic growth going to improve? Is inflation dead or will it increase closer to the Fed’s and ECBs 2.0% targets? Is the US stock market a bubble? Many more questions out there but no solid answers. The uncertainty is so deep that you can bring enough data and expertise together to prove whatever point you want to want it to be. Mix all those questions into a pot that is too hot to touch – and the result is what is happening - wide swings. Personally I still hold there is going to be another move lower on the 10yr, possibly back down to 1.90% (2.26% currently) – Hey, I am not the only one stating this as there are others out there that are a whole lot smarter than me saying the same thing!

The bond and mortgage markets remain bearish near term - loans that have been put together and are closing in the next 30 days should be locked in. I spend hours reading a lot of analysis from The Street and private analysts - bottom line is, the new normal economy does not fit with any of the historical comparisons you probably hear or read. Take it all with a grain of salt and let market activity lead you, refrain from locking in any outlook in your thinking now. Not even the Fed is sure what to do, what makes any of us think we can accurately forecast a month from now?

The only economic data for April or May that has been good was today’s housing starts and permits. Tomorrow the FOMC minutes from the April meeting. Thursday though will be very interesting and important when April existing home sales will be reported - starts are great but is there buying? Janet Yellen will speak on the economy on Friday afternoon, according to her schedule she will start at Noon with the bond market set to close at 1:00. The rest of this week we do not look for any rallies in the rate markets. The dollar rallied today taking crude lower and gold down.

In summary, it is safe to say that the tide is continuing to move towards higher rates. Tomorrow brings the release of the FOMC minutes from their April meeting. Any discussions of rosy economic conditions or looming inflation will only send rates higher. There's no reason in my mind to risk pricing when the trend is against us. Lock 'em if you got 'em.