Mortgage Rates Moved Up in a Panick

Mortgage rates moved higher today as global markets managed to avoid the same sort of panicked volatility seen yesterday.  Rally ‘round the flag pole.  The stock market had a better day while the bond and MBSs had a bad one. Volatility in equities s not over, listening to some talking heads through the day however you would believe it is back to rallying mode – but do not buy that. Markets so far are all lower than at the beginning of the year. Now into the end of the eighth month this year, no profits from being long indexes.

The bellwether 10yr yield now back above 2.00% and MBS prices that gained a total of 42 basis points since the close last Thursday today all of those gains were crushed and prices actually lower than last Thursday. The same picture with the 10yr note.

Today’ $26B 2yr auction was not bid strongly, more evidence that demand is low for fixed income. Tomorrow July durable goods orders will be reported as well as the Treasury will auction $35B of 5yr notes.

Volatility dominate again today, just look at the equity markets. The DJIA at its high up 441 points today, ending lower on the day. The bond and MBS markets lost some ground when the 10yr was unable to break the resistance at 2.00% yesterday, dropping to 1.90% intraday yesterday but ended at 2.00%. The 10yr drove up to 2.13% at its highest today, ending at 2.10%.   Likely the reversal of gains today will send equity indexes lower and we expect interest rates will improve tomorrow, including mortgages. Hold it though! I do not want float overnight. Although I believe there is a good chance of rate gains tomorrow, I would rather let it happen than bet on it right now. Markets now are too uncertain day to day, there is a real danger of being whipped-sawed now. MBSs were 16BPS lower at 9:30 from yesterday, then dropped to -50 before ending the day down.

In summary, we have had a great run but all runs take a pause at some time. Today was one of those days we were given up gains and rates worsened. As I mentioned yesterday it is a good idea to lock if you have a closing date coming up. I do believe the trend for rates is lower so if you have over 30 days before closing or more you can float and wait for the next leg lower for rates.