Mortgage Rates Enjoy Big Push

Mortgage rates had their best day in over a month today with a big push in the positive direction.  It was the first day with any legitimate movement in nearly three weeks. 

Mixed data reports again today as both stocks and bonds rallied today - the bond market on weak manufacturing, stocks on auto sales and the new idea that MAYBE the Fed will not increase rates on the 16th as has been widely anticipated.  Could be a one and off market in bonds today, but the 10yr breaking 2.20% is a positive technical break. Tomorrow Janet Yellen has an opportunity to make a clear statement on what she will do with rates this month, most likely though she will fall back on ‘data dependent’ data with November employment coming on Friday.

 Fedspeak never ends, it drones on and on. According to trading in FF futures there is an 80% probability the Fed will move this month. Yellen is expected to focus more on what the Fed may do through 2016. Interesting to hear and read but Yellen and the Fed have little idea now what 2016 will look like, so it is another speech with not much lasting meaning; although markets will take notice. 

Other than Yellen tomorrow, there is the ADP Nov private jobs report at 7:15 AM, consensus is ADP will report private jobs increased 183K about what ADP reported for October. Tomorrow afternoon the Fed will release its Beige Book, the report from the Fed staff on all 12 districts and used by the FOMC at its coming meeting.

The 10yr moved down today, breaking the strong technical resistance at 2.20%, the note dropped to 2.15% with shorts being lifted after the resistance broke down. Do not fight the tape now, both treasuries and MBSs are technically more bullish now. The 10yr now has support at 2.20%, the former resistance level. I am floating right now, but am not in a comfortable position with the Fed looming and the November employment report on Friday. Thursday the ECB meeting with expectations of more stimulus, also has the ISM services index and Oct factory orders. Although market price action is bullish the uncertainty is at high levels and can change in an instant on news or data.

In summary, rates rallied today, somewhat surprisingly, as bonds posted their largest gains in the past two months.  Whether the motivation was tepid economic data or traders consolidating their positions, I will gladly take the improvements, especially if they do not evaporate as fast as they appeared.  Days like today make for a tough lock/float call.  Right now I am floating but watching the markets very closely.