Mortgage Rates Have Another Good Day

Mortgage rates has another good day for those that are floating, but as I have noted before, it is a risky move based entirely on what equity markets are doing around the world. Tired of hearing from perennial market bulls and the Fed touting the strength of the economy and that inflation is ‘just around the corner’. The 10yr note, the driver for mortgage rates and prices, declined to the lowest level since August 21st. FNMA 3.5 coupon closed today at its highest price since August 24th. 

Today the headline of the consumer confidence jumped higher, and even though it looked good, the internal numbers that make up the total number was not as good.  Consumers’ optimism about the short-term outlook was little changed in September. The percentage of consumers expecting business conditions to improve over the next six months increased, but those expecting business conditions to worsen also increased. Consumers’ outlook for the labor market was mixed. Those anticipating more jobs in the months ahead was virtually unchanged, while those anticipating fewer jobs increased. The proportion of consumers expecting their incomes to increase improved, while the proportion expecting a decline inched up. The markets ignored the report as they should. Both this and the consumer sentiment from the U. of Michigan are not reliable indicators as they were years ago.

Tomorrow begins the three day monthly countdown to Friday’s employment report. ADP will report private jobs increased. Then, a little later we will get the September Chicago purchasing managers index which should be flat.

Friday we get employment. Next week China’s markets are closed. Going to be hard to push prices higher and yields lower until employment on Friday and maybe all of next week. I do not believe the bullish technical pattern will turn bearish, it would take the 10yr note to move above 2.20% a key pivot point however. There is little reason to focus solely on MBS movement, the prime focus should be on how the bellwether 10yr Treasury note moves, that will drive MBS price action.

In summary, mortgage rates improved today and we are nearing the lows of the last 5 months.  Momentum "feels" like it is in our favor, but until we see a strong and committed break lower we could simply be at the bottom of the range.  The smart move, the one that plays on the highest odds, is too lock at this level, but if you love the risk, do so with caution.