Mortgage Rates Drawing Concern

Mortgage rates were slightly higher again today, and this time, it is personal!  OK, so it is not really "personal," but it is now more of a concern for those following my blog on my web site and check under the “Rates & Trends” tab - and hoping they will stay near all-time lows.  We actually get more help from US Treasuries in arriving at this conclusion than we do from mortgage rates themselves.  That's not because Treasuries are directly linked to mortgage rates, but rather because Treasuries are a better indicator of trends in the overall market for debt and interest rates. 

At the moment, the yield on the US 10yr Treasury is hovering just over 1.53.  This is a critical level that acted as a floor in both February and June.  Then it acted as a ceiling on several occasions since then.  This sort of "floor/ceiling" behavior suggests there would be some additional upward momentum for rates if they are able to break through.  There is no way to know how much of an impact that would have on the rates.

All the data tomorrow may over-ride markets that are focused on more stimulus from Japan and the UK exit. Stocks continue to increase climbing the Wall of Worry while long-time fund managers like Larry Fink of Blackrock are questioning the increase. I agree, the run-up in equity markets is hard to justify at these levels but the fear factor from money managers and large investors has about ended because any selling since early Feb has in hindsight been a buying opportunity. One day a selling bout will not rebound and the result will shock everyone. While debating is interesting; it is what it is and equity markets are on fire the last week.  All bets now are for central banks to start another huge stimulus round.  

In summary, data tomorrow must confirm consumer strength and factory use - if not, the momentary run-up in stocks and the over the top media mania over it will get hit. It has been a long while since I have seen this type of raid swing in sentiment as noted above. Markets, including the bond market for reasons I cannot believe are curiously betting that central bank stimulus will work this time and ignore every other previous failed attempt as if it never happened. The bond market was long in the tooth and maybe still is, techs are bearish for the near term but safety still matters.