Mortgage Rates Continue to Rise

Mortgage rates continued a little higher today that started with the early morning news from Friday in regards to the Employment numbers, but it was not as bad as it was once feared when the markets were not yet opened this morning.  As the day went on, overall, it was quiet.

The bellwether 10yr note yield increased this morning to 1.61% but by mid-morning it held the support I have been talking about for weeks at 1.60% (close enough to say it held). In round numbers and except one day on 7/29 (when the advance Q2 GDP was reported at just 1.2%), the 10yr has traded between 1.50% and 1.60%. Meanwhile stock indexes through that period made new highs on the DJIA and S&P. Standing back for a better view, there has been no real change in rates for a month, even though we are higher now than we were at the beginning of July. Meanwhile every report including Friday’s strong jobs has gotten of ink and media attention but there has been literally no change in rates.

Consumer expectations about spending ticked up in July, and households expected better income growth and finances in the future, positive signs for economic growth according the NY Fed Survey of Consumer Expectations.

US consumers are spending and the consensus seems to be that will continue to spend unlike the rest of the world where savings are increasing and spending is slowing. According to an article in the WSJ recent economic data show consumers are saving more in Germany and Japan, and in Denmark, Switzerland and Sweden, three non-eurozone countries with negative rates, savings are at their highest since 1995.  Could it be that consumers in other parts of the world are more fearful of the future than in the US?

Will the technical support at 1.60% hold? If it does it is not likely to decline much - as noted above there has been no real change in rates for a month now. There is little reason to float, as I do not see that to change much unless there is a new ingredient added to the soup. All of the technical work that includes a dozen different approaches are neutral as long as the 10yr range continues. But the market is at the key pivot now that increases floating risk. It takes direct management now to trade the current market.

In summary, Bonds have managed to not lose any more ground today following Friday's huge jobs beat.  With us holding ground here, I still believe caution is the key to floating, but if you are about to close, lock it up as the risks is too much for it to become positive.  As always, only float if you can afford to be wrong.  If you are happy with current terms, nothing wrong with locking.