Mortgage Rates Moved Slightly Lower

Mortgage rates moved just slightly lower today, following a fairly abrupt spike over the first two days of the week.  This the sort of movement that neither confirms nor rejects the possibility that early July marked long-term lows.  Instead, it is much better than at least the alternative, to be sure.  Specifically, if rates had continued higher today, they would have crossed key levels that suggested more upward momentum. 

All this action was coming in on the heels of the 10yr Treasury note.  So far I do not think it anything significant other than as we have been noting, there is still demand for US treasuries out there. One illustrative today after the very weak 10yr auction yesterday (the weakest in seven years), today the 30yr bond auction met with very strong demand.  Even though it was a small auction, the demand was evident.

The Fed released its Beige Book this afternoon to a yawn, as markets have not given too much credence to the Fed’s comments as much as it was in the past. Tomorrow markets will finally begin to get some domestic data with June PPI and weekly jobless claims. Friday markets will have June retail sales, CPI, industrial production and factory use, business inventories and the U. of Michigan consumer sentiment index.  

The improvement in the treasury markets today should not be taken as a buying opportunity, but  just a trading bounce. Technically the 10yr held its first minor support at 1.53% yesterday but the major trend support is 1.60%. Sovereign debt markets in Germany, France and the U.K. also rebounded somewhat today.

The Brits have a new Prime Minister; Theresa May. She has a plate full with the UK vote which she did not favor, she wanted to stay. Already she has made a number of key appointments to her cabinet.

In summary, bonds hung tough today, with 10yr yields in 1.47% range, which is highly encouraging.  Rates are back in "wait and see" mode, but on the right side of the yield fence.  Until we get a definitive move, whether up or down, hard to say where this goes.  I am going to cautiously float most new applications, but if treasuries break 1.53%, that stance will change in an instant.