Mortgage Rates Continue to Go Lower

Mortgage rates are looking like they've exhausted the playbook in terms of making big moves down the field, yet they continue to pick up a few yards every play.  OK, I know football season is just around the corner and with me going on my 37^th year of officiating, I had to use this analogy!

This morning’s 42 year low in weekly jobless claims has, and should have been, ignored.  Seasonal factors and lessening labor participation rates make it a non-factor as far as we are concerned, and markets also thinking the same thing.

Global equity markets have been declining recently, and I believe now it is time that our markets fall under the same spell. The S&P is hanging on by its nails, the DJIA now lower on the year. If we are correct look for the 10yr note and 30yr bond to decline in yield soon. Always a fly in the soup in the near term though - the FOMC meeting next week. Slowly the major sell-off we have been expecting is presently gaining momentum - commodity prices dropping, the dollar strengthening and the Fed being put in a bind with the outlook for inflation suddenly lessening. Then there is Europe - there is a lot more angst coming from the EU that will take its toll on world markets. It will be a struggle to send investors out of equities as there is no other place to go for most investors; nevertheless we believe it won’t be long now.

Tomorrow June new home sales will come out.  The work now slightly bullish but it is shaky, the FOMC meeting next week is likely to keep rate markets in a tight range although the fundamentals are increasingly worsening for the economy and US equity markets based on the key indexes. This week the DJIA down 367 since Monday and now lower than at the beginning of the year, the S&P testing critical technical levels. We have moved from slightly bearish over the last week, to neutral going into today, now slightly bullish. It is always difficult to get on board when the train is leaving the station, but even more difficult after it builds up speed.

In summary, are we finally going to see some results?   Rates continued lower today, and the benchmark 10yr treasury broke some significant resistance to hit 2.28% in afternoon trading. MBS didn't see the same magnitude of improvement, which is not that unusual. We are approaching our best pricing since July 8th, which was better than all of June. Today's gains came in spite of, not due to, economic data, which makes the move even more meaningful. I am tempted to float here, for borrowers with some risk tolerance. There is certainly no shame in locking while rates are near one month lows, as well.