Mortgage Rates See Better Pricing

We saw better prices today as the MBS market settled down somewhat but I am still reluctant to recommend floating short term. Do not mind missing a little given the extreme intraday price swings. However we might be seeing a new trading range from 2.25% to 2.20%? After the big move in a short time in the bond market rates will likely settle a little. That said, I thought this a possibility a few days ago only to see the 10yr yield increase further and MBS prices decline. Regardless of whether a new range is building, the rate markets will remain bearish for the next week as the 10yr has to break 2.12%.

This afternoon Treasury sold $16B of a new 30yr bond. The auction met with decent demand but not as strong as yesterday’s very healthy 10yr demand. Crude oil price declined a little today, nothing serious or market impacting but any down day is appreciated.

Inflation at the wholesale level actually dropped in April.  Retail sales in April were very disappointing and less than expectations for five consecutive months. Not to worry according to some analysts as sales have not increased and consumer spending is remaining low believe that once consumers are sure that the decline in gasoline prices are real and lasting then consumers will begin to spend more. Well, so far consumers may have a point for the moment - gasoline prices have increased recently by $0.50 gal (or more depending on where in the country). It takes a lot these days to shake the bullish economic outlook.

Tomorrow we have the May NY Empire State manufacturing index, Industrial production, and  the U. of Michigan mid-month consumer sentiment index.

In summary, yesterday's stellar bond auction created a sell off and today's poor auction did not.  We are living in interesting times and often these times can bring opportunities or punishments.  The ways I see it at the moment bond yields appear to be forming a top.  If seller exhaustion is finally here in bonds and buyers start to flee the equity market we may have a huge opportunity on our hands to float and benefit.  Of course this does come with risk and things could change quickly – and this is tempting if you have yet to lock in on your rate.