Mortgage Rates Stops the Losing Streak

Mortgage rates did not move much today.  The losing streak (of higher rates) over the previous 3 days is now essentially over.  This does not mean rates cannot rise any more from here, just that they would need to find a new reason to do so, instead of merely cooling off after a big spike lower. We had a wild week! You know what I mean.

Next week is likely to be more of the same. Jackson Hole comments over the weekend will have much to digest even without Yellen there. Bernanke did not show up last year and Yellen had to stay away so she would not have to address the uncertainty about what the Fed is thinking, since the Fed is not sure what it is thinking now. The September 17th FOMC policy statement and her press conference is closing fast. No consensus now about when the Fed will hike rates, we believe when the Fed does move it will not have much, if any, market reaction. It has been on the table longer than salt and pepper shakers. Once more, the Fed is not going to launch a sustained increase - it will be a one off thing, at least for many months.

Next week - August employment on Friday.  In the meantime both August ISM indexes, July construction spending, July factory orders Q2 productivity and unit labor costs, and the Fed Beige Book. Every one a key economic report that will increase or decrease what the Fed may do. Stock market volatility is not over either, next week I expect contend swings in the key indexes, hopefully not as severe as this week but I cannot discount that possibility. Nevertheless mortgage rates and treasury market are not likely to improve much. Rate markets this week did not rally, actually prices declined and the 10yr note rate increased.

We lost a lot of the bullish momentum in the treasury market this week moving to neutral from bullish a week ago. On Tuesday the 10yr note on the reaction to global panic in equity markets dropped to 1.90% but was rejected almost immediately, the 10yr ended that day at 2.07%. 2.00% will be difficult to break, no one now wants to buy with a handle on the note.

In summary, the benchmark 10 year note has been holding just under 2.20 for the last couple days. It's nice to hold our ground, but despite Monday's large gains, we're closing near the highest rates of the week. I don't see a short term motivation for rates to drop substantially. For most borrowers, I'll continue to advise locking early in the process, if within 30 days of closing.