Mortgage Rates Holding Their Ground

Mortgage rates held their ground fairly well, despite moderate weakness in underlying bond markets as there was not much to say today. The bond and mortgage markets were very tame compared to some of the recent days. There was no domestic data to consider, in Europe and China data points were weaker than expected but in Europe it was countered by Mario Draghi saying the ECB is in it for as long as it takes (QE); markets though were not impressed.

Treasury auctioned $35B of 5yr notes this afternoon and got a strong did from indirects. Tomorrow we get weekly jobless claims, August durable goods orders, and later August new home sales. Last Monday existing home sales were down from July. At Noon Treasury will auction $29B of 7yr notes.

One of the more quiet sessions we have had for weeks, as stocks did not do anything, the bond and mortgage markets very still today. There is not much to drive interest rates lower now unless there is one of those huge routs in equity markets and that does not seem likely in the near term. Floating is not likely to hurt but equally not likely to prove beneficial. In this kind of market where no improvements look likely floating does carry increased risk - much easier for prices to decline now than increase.

In summary, after recouping all of Monday’s losses yesterday we have drifted mostly sideways today. Treasuries have stayed between 2.13-2.21 for 28 of the past 30 days, and look quite comfortable there.  MBS traded within a narrow 50 bps range for the same period as well.  One of these days, something will jolt markets into definitive moves higher/lower.  What that will take, and when it will happen are the great unknowns.  Folks within 30 days of locking could sure do worse than locking here.  Those with longer timelines need to discuss floating's risk/reward ratio to see if that is a wise idea.