Mortgage Rates Steady
Mortgage rates held steady for a second straight day,
but market volatility continued today - with real time quote reception you may
not have noticed. The stock market opened better this morning running up 199
points, the 10yr note yield increased to 2.26% and MBSs were down 17BPS, but by
early this afternoon the stock market rolled over, the 10yr note improved to
the pivot resistance at 2.20% and MBS prices up 6BPS. The financial markets are
hardly moving when looked at in wider perspective, the interest rate markets
have not had a meaningful trend since early November. Looks like the equity
markets are rife with leveraged trades using margin - with the interday and
intraday volatility many trades are being hit with margin calls. Many reasons for
the volatility but the prime one if next week’s FOMC meeting and the
anticipated rate increase of 0.25% for FFs.
There is clearly uncertainty about what will happen
when the Fed moves while the ECB continues with its stimulus. The dollar a week
ago was increasing against the euro and yen the dollar index traded at a
multi-year high. Since then the dollar has weakened. Crude oil this morning
slightly firmer until 9:30 when the inventory levels were reported lower than
oil traders were expecting. Commodity prices declined with crude this afternoon.
The ECB set off a firestorm last Thursday announcing a less aggressive stimulus
than most thought would be the case. With the background of uncertainty
interest rates spiked higher, it lasted two sessions before the bond and MBS
markets recovered and now back to levels last Wednesday.
This afternoon Treasury sold $21B of 10 yr notes
re-opening the Nov issue. The auction met with good indirect demand (foreign
investors). Generally, the auction was in line with previous 10yr auctions. So
far no significant data this week expect today’s October inventories that were
less than expected, and September inventory levels revised downward. Businesses
appear fearful of allowing inventory levels to increase. Inventories of durable
goods also declined in October.
Tomorrow just weekly claims and November import and
export prices, along with the Treasury will sell $13B of 30yr bonds re-opening
the bond issued in November.
In summary, the technical work remains neutral; not
bullish or bearish, that has been the case now for over a week. The volatility in the marketplace has everyone
right now guessing which way will mortgage rates go after the announcement next
week. The rate may be built into the
market, but the interest rates need to rise – but will they?
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