Mortgage Rates Improved Despite Volatility

Mortgage rates improved a little today despite the volatility that was rampant ever since the January CPI report came out.  Overall, US stock indexes improved this week in a volatile run with the MBS and treasury markets chopped around but at the end of the week generally unchanged. You can call this week any way you would like but there was not much that had changed. The stock market got back some of the recent losses as we expected, interest rates had a volatile week but the path is still pointing to lower rates ahead. As I have noted a few times though, the path is full of chuck holes (only those that live in cold climates understand the significance).

Next week is full of key reports leading to Friday’s second look at Q4 GDP. Global markets of course are still in play no matter what others think, that the US can grow on its own. Bullish investors pushing hard on the idea that the US can shine on its own. I do not completely disagree but it is a matter of the magnitude that bothers me.

This week the 10yr Treasury ended at 1.75% while the MBSs were up only 3BPS.  As noted, the stock market did well on getting some of its loses back, while we saw Gold tumble by $13.00 and Crude Oil was up $0.90 for the week.

Techs continue to hold, but at a crossroads for the near term. I do not believe rates will improve much next week, as I still see we will be in a retracement mode for stocks and bonds. Consumers close to closing should not accept the risk of floating now. The prudent plan is to lock, as I anticipate that next week is likely to be volatile with all the incoming data - existing and new home sales in January, February consumer confidence, Treasury auctions of 2s, 5s and 7s, Q4 GDP, January personal income and spending, and not to be overlooked, a number of Fed officials speaking.

In summary, I have provided some guidance to clients this week to lock if we are getting close to closing. Yes, we did see some volatility day to day, but seeing the 10yr Treasury approach the 1.84% yield and retreat, that gave me some confidence that those who did float are still looking good.  For short terms (15 days or shorter), locking is a smart move. Past this, I still have the confidence in the market ultimately being stronger - much like it was today.