Mortgage Rates Are Low

Mortgage rates fell again today.  The point is that rates are low!  At the moment, the biggest risks to rates are rather immediate.  First of all, there's the simple fact that rates are increasingly likely to bounce with each successive day of improvement.  A streak like this is about as long as it gets, save for only a few occasions in the past decade.  Now, that does not necessarily mean rates will continue to head higher after that bounce - simply that we are due a pause. 

The FOMC minutes from the June meeting did not have any impact on the bond and mortgage markets this afternoon as expected.  A strong open I the treasury market this morning but it did not last, although the rates remain low and MBS prices slightly lower through the session after opening better early this morning. The stock market a little better driven today on higher oil prices and the strong ISM services sector index this morning (see the morning report). Still when I listen to the guests on CNBC and Bloomberg the outlook according to the majority is higher stock market prices. Not much of importance from the media or pundits about the low interest rates environment - the shock of it still has not sunk in and not many willing to project how low interest rates may go. As I have been predicting, I do believe 1.25% is still there to be seen but I worry in the short run rates may have exceeded momentary reality. Friday the June employment report holds one key, after the anemic 38K new jobs in May markets may see upward revisions for a change and June is expected +180K back to the previous norms. A note of caution, recent revisions top previous jobs reports have been lower than originally reported.

Tomorrow morning at 7:15AM ADP will report its private jobs, expected up 150K after reporting May jobs were up 173K - a huge deviation from the BLS numbers for May. Weekly claims will follow 15 minutes later.

In summary, do you look a gift horse in the mouth?  If you do, then float on.  For those of you who do not, lock your rate.  We are in all time new low territory right now, at least as far as Treasury yields are concerned.  Mortgage rates have been here once before but that was a long time ago.  Long term I think rates get better from here but in the near future we could see a pull back for profit taking and you must not forget this Friday is NFP.  If we get a good jobs number, then I would expect a very healthy dose of profit taking and a large pull back in rates.