Mortgage Rates Higher

Mortgage rates moved higher today bringing them to levels not seen since the beginning of February.  The culprit is when the news came out on January construction spending - three times better than thought. February ISM manufacturing index still in contraction levels but the index at 49.5 was better than 48.5 expected. Data globally on manufacturing was soft but global markets all rallied.  February marked a fourth consecutive monthly slide for global stocks, signs that financial tension in China and a slump in commodities are abating has seen shares recover more than 5% since Feb. 11.  The huge swing from yesterday to today a surprise in terms of the magnitude. The interest rate markets took a bigger hit than what I would have thought given the data. And the move is also unusual ahead of a monthly employment report. The ease and swiftness that took MBS and treasury prices down reminds that the bond and mortgage markets are technically bearish now. Today, definitely a risk off day.

Super Tuesday and I do not think it had any impact on the markets today, but there are those that make a living looking for connections between news and markets. Tomorrow February ADP jobs report expected +185K after an increase of 205K in January. The Fed will release the Beige Book tomorrow afternoon and crude oil inventories will be released. Looks more and more like the drop in crude oil prices has run out of momentum as the price is inching higher recently. It was one hell of a trade but we believe the easy part is over now.

We are now in the employment mode.  After today, expect increased volatility in equity markets. Techs are increasingly negative for the interest rate markets. The 10yr yield at 1.83% is at the high yield set on Feb 16th before rates declined and prices increased. The support for MBSs are holding its mark. If these levels are penetrated on a closing basis it will encourage additional selling.

In summary, if you missed the opportunity to lock this morning ahead of the reprices for the worse, I would go ahead and float overnight. We have some solid support just overhead on the 10yr note, and until that breaks, I would continue to float and lock on the next dip.