Mortgage Rates Calm Down

Mortgage rates finally calmed down today after a wild three day rides that saw them head higher after hitting three month lows.  Today is more of a sideways day as MBS are squeezed in a very tight range supported by our 25 day and capped by our 10 day/100 day. Overall today's economic data was negative for MBS but our support is so strong here that we are not getting hurt.  And you could not get more sideways than just 4BPS for our intra-day change as our upper resistance proved to be just too strong.

What is interesting is that EVERYTHING today was negative for pricing yet we are still up. The stock market is up over 200 points, The German bund and U.S. 10 year notes have higher yields, Oil is up and our economic data was stronger than expected - that shows you just how strong our 25 day support level is right now.

Coverage for today's 7-year auction was the strongest of the year, since November. And unlike yesterday's 2-year floating rate and 5-year fixed rate auctions, bidding was tight as the high yield was under expectations. Buy-and-hold investors, which have been scarce at this week's auctions, showed up for this one, judging by the moderate 35 percent share of the $35 billion offering that was awarded to dealers. MBS did improve on the results but could not maintain those small gains.

Tomorrow we get Personal Income and Spending and a very important PCE (key measure of inflation) and Consumer Sentiment Index.

In summary, after losing ground since Monday AM's market panic, rates leveled off today following a strong 7yr bond auction. We are essentially back to early August levels, the question is where we go from here. China's economy certainly has not turned around in 3 days, but I doubt we will see such a massive reaction to any further developments. I do not see an imminent rally looming, so would lean towards locking early in the loan process at this point.