Mortgage Continue Higher

Mortgage rates continued slightly higher today, though they appeared to have second thoughts about that at first. More volatility today, but unlike yesterday the stock indexes held their gains into the close. Interest rate markets continue to increase and prices declined again today. No safe haven moves from equities to treasuries. Yesterday the DJIA rallied up 440 points until late in the afternoon then ended down 205 points on the day. Today some intraday selling after the stronger open this morning, but unlike yesterday any selling did not last. This is not the end of the selling, as I expect this kind of volatility to remain for at least the next week and possibly longer. The bond market is vulnerable to more selling and declining prices with wide swings.

Tomorrow markets will be exposed to the 1st revision for Q2 DGP along with Weekly jobless claims.

Who wants treasuries, thus MBSs - not many these days. The demand is not there, the bullish models are very close to turning bearish. Why no interest? No practical benefit to move to safety with bond yields so low. Technically the 10yr put a bearish pattern in place Friday, Monday and Tuesday - an island reversal that I do not see very often in the bond markets. Friday to Monday a new low on the 10yr yield, Tuesday (yesterday) the trading range left the range on the 10yr hanging there with the yield low higher than Monday gapping higher yesterday. Today, unlike yesterday the stock market closed at the highs of the day. Expect continued volatility in stocks and bonds, this is not over.

In summary, we finally received something we have not in weeks and that is better than expected economic data. We also had a poorly received 5yr year treasury auction and both those combined with the equity rally you would think rates would shoot much higher. Instead 10yr are up about 4 ticks from yesterday. I am encouraged by this but I do feel rates may head a bit higher before they head lower. Lock if you are closing soon but float if you are outside of 30 days.