Mortgage Rates and Volatility

Mortgage rates had a far more tumultuous day despite ultimately hanging on to the lowest levels in more than 8 months.  Whether you wanted to be happy, sad, excited, or scared, there was something for everyone today.  The bond markets that underlie mortgage rate movement began the day in weaker shape (implying higher rates).  But a later and important economic report sent bond yields and stock prices screaming lower later in the morning.

The ISM report was weaker than expected and the lowest reading back to February 2014.  This report when broken down sent the markets into a tizzy.  Crude oil increased today taking the early morning improvements in treasuries and MBSs back off the initial high prices.

NY Fed President Dudley (FOMC voter) says tightening of credit conditions could weigh on FOMC as the weakening of global economy coupled with dollar strength could have consequences for U.S. economy. One more Fed official that is talking dovish and adding to the current view the Fed will not increase the FF rate as was widely expected just four weeks ago. Also another reminder how uncertain the outlook is for economic growth these days, leading to the interday and at time the intraday market volatility.

Tomorrow weekly claims, Q4 productivity and Q4 unit labor costs.  Tomorrow markets will prepare for Friday’s January unemployment data.

More intraday volatility today as we saw the 10yr note yield this morning dropped to 1.80% early then ran back to 1.87% this afternoon.  The DJIA opened 100 higher then fell 125 before rallying up 200 points before settling this afternoon up 183. Going down the line, everything was either up or down, causing the markets to shift one way and then another.  Needless to say, can you say “VOLATILITY”?

In summary, the bond rallies have been overly generous this year.  Floating can be related to greed on some of us, but the ol’ saying “Pigs Get Fat, Hogs Get Slaughtered” could be out there  for us to think about.  Long term, I still see far more economic issues than solutions, hopefully leading to stable, low rates!