Quiet Day with Mortgage Rates

Another quiet trade in the MBS and bond markets today while the stock market continued to retrace it’s recent but not over selling binge.  Based on indexes stocks have rebounded very nicely in the last week - the interesting thing though is that interest rates have not increased much. The de-coupling between equity markets and bonds is not as severe as in previous risk off moves like  we saw in 2013 bond tantrum the Fed pushed more QE,  and the 2015 bund tantrum when the ECB said it has more bullets than the German Army. My outlook has not changed - the path though is not a straight flat one, more like a back-packing trip in the mountains. The 10yr yield has more downside opportunity than the upside - looking for the 10yr at or close to 1.50% (some have even stated lower than this) by year end as the economy moves toward recession.

The wild bear market in oil that dominated everything in 2015 and early this year, is likely over.  Recent activity has pushed oil prices higher as trader’s short oil finally realized at the low $20.00 levels there was little left. Crude now moving higher, supporting the equity markets and providing a hurdle for the interest rate markets. News that a production freeze may be in the offing continues, although no real progress, just talk. In the world of oil trading most movements are driven by rumors, whether correct or not, well before reality.

Oil prices stoking the equity markets these days. Economic data not super strong nor weak, just muddling along as the retracement continues. No inflation in the last 4 years and none in the foreseeable future keeping inventories low - still too many homes under water, regardless of the optimistic outlook for employment wages and credit standards remain a restraint on the sector.

The techs now neutral, neither bullish nor bearish. This week’s data concluding Friday with Q4 GDP may temper the current optimistic outlook in the stock markets and possibly improve the bond and mortgage markets when GDP hits Friday morning. Treasury auctions this week carry weight based on demand. 2yr notes tomorrow we have a look at demand with the Fed in play in March. No increase in March as far as we are concerned and the general market expectations. Expectations these days are paper thin and emotionally driven.

In summary, rates were flat today, despite stocks' robust gains.  In this case, NOT losing ground is a bullish sign for bonds, particularly given the corporate bond supply this week.  I am still not expecting major pricing improvements soon, but just holding our ground sure helps us all.  I am floating most loans over 15 days from closing.  Happy with your pricing and not a big risk taker?  Lock it up and do not look back.