Mortgage Rates Hold Steady

Mortgage rates did not improve today as I had hoped they would, but they did hold steady ending the week at their best levels since at least January 2015.  In fact, the rates are close to being at three year lows. 

After my constant comments that crude oil rules all financial markets - stocks, bonds and currencies today crude was up over $2.00 and about to test the $40.00 mark. The stock market however after trading higher all day came under pressure in the last hour.  I am not so sure why the deviation but as the saying in trading goes, never say never, never say always. The decline in stock indexes today from their highs is not a surprise however, as I still look for a selling run in stocks. The DJIA was +150 before ending the session lower. On the pullback in equity markets the bond and MBS markets improved and supports pour bullish bias now.

This week we saw the 10-year end today at 1.72% and MBSs up a positive 25BPS on the week.  Crude was also up $2.71.  Next week we have a bit more data to digest, but nothing on Monday.  Tuesday Treasury will auction $24B of 3yr notes, March import and export prices, NFIB small business optimism index. Wednesday, March retail sales, March PPI, February business inventories, $20B 10yr note auction, Fed Beige Book. Thursday, March CPI, weekly claims, $12B 30yr bond auction. Friday, April NY Fed manufacturing index, Mach industrial production, April consumer sentiment index (U. of Michigan). Next week no less than 7 Fed speakers will dot the week (and you know how I feel when they talk).

Next week we have to monitor the bond market closely even though the work remains positive now, there is a likelihood that rates may move up a little with the auctions, key economic data,  and after the 10yr hit its technical resistance at 1.70% yesterday.

In terms of strategy, it is never a bad idea to lock in gains if you have been floating for a while, but we are definitely in the middle of a trend toward lower rates.  In financial markets, trends can end at any time, but as long as you are prepared to lock when that happens, and understand that it will be a slightly worse deal than it was the day before, floating is an equally sound strategy at the moment for risk-tolerant borrowers. 

In summary, there has been a relentless wave of downbeat economic news the last couple days, from Fed speakers, GDP revisions, and ECB comments.  While I am looking at the possibility of lower rates, currently we see support for our current levels.  Risk averse borrowers who lock now get great pricing.  More aggressive folks who float may see further gains.  If you can afford to be wrong, I would continue to float and watch the market closely.

Before I end this column, Monday is a Holy Day here in St. Louis as it is Opening Day for the St. Louis Cardinals.  I will be in early on Monday, but plan to leave after I see which way the market looks for my customers.  More than likely, Monday evening there may not be a report – GO CARDS!