Mortgage Rates Off Today

Mortgage rates were in line with the best levels in eight months as of last Friday.  Although they moved slightly higher to begin the new week, today is still the 2nd best day in the past 8 months.  The selling today in interest rate markets was not on any change in the underlying fundamentals.

Crude oil was down over $2.00, and stock indexes traded better for most of the day. The bond market just overbought as I may have thought, and I seriously thought about locking some loans today but held off.  The trend remains positive for interest rates, bearish for equity markets but markets settling back ahead of January employment on Friday.

This morning’s data was not good as we saw personal spending in December was flat. The January ISM manufacturing index was about in line but still in contraction as it will be this year with global economic declines and the strong US dollar. December construction spending was way down. Q4 GDP reported last Friday is very likely to be revised weaker when the preliminary report hits at the end of this month.

Tomorrow the only economic data is the January auto and truck sales, which is expected to be positive.

Nothing has changed from our bullish outlook for interest rates.  U.S. government bonds started February’s trading on a down note as investors took some chips off the table after the biggest monthly price rally in a year. Markets today taking a breather. Crude declining should have hampered stocks and supported the bond market based on trading since the beginning of the year. Nothing has changed, just a little calm to start the week. MBS market, a thinly trade one, saw prices drop as much as 26BPS this afternoon, but ended up a minus 10 BPS on the day.

In summary, bonds lost some ground today, while still remaining near 8 month highs.  The benchmark 10yr Treasury yield remained below 2%, but showed no desire to drop further.  There was more tepid economic data, both domestic and foreign, which is bond friendly.  If you are floating, do so with caution, but lock anything in the next 15 days of closing. This is NFP week, and as Friday nears, lenders' pricing can become more conservative.