Mortgage Rates Steady - But Still Volatile

Mortgage rates stayed steady today, even though they were on a bit of a roller coaster today as they did go up and down – as it looked it wanted to push one way or another – but did not. Bond markets (which underlie rate movement) are beginning the process of winding down for the holiday season.  That does not mean that rates will not move for the rest of the year - simply which the intraday rate movement will be more random.  This can be frustrating in the coming weeks because it can result in big changes without any warning based on the slate of events on the calendar.

The dollar this week has seen huge increases against other currencies, not good for US exports and global US debt holders. Today quiet in the currency markets. I have been talking this week about what I believe and what is occurring, and here are some additional comments taken from Bloomberg News about what some others are thinking now:

Bank of America Merrill Lynch – The US election was a game-changing development for markets, with single-party rule likely leading to significant fiscal stimulus.  We look for a stronger dollar and higher US yields in 2017, with the 10yr targeting 2.65% by the end of this year.

JP Morgan Chase & Co. – We estimate that Trump’s corporate tax plan, which incorporates a 15 percent statutory federal tax rate, would add roughly $15 to S&P 500 earnings.

This week we saw the 10yr increase by 13BPS and the MBSs loosing 111BPS.  Not too good for the mortgage rates.  Next week we do not have too much data coming out but on Monday, Janet Yellen will talk which could move the markets again.

Nothing different - rate markets are technically and fundamentally bearish.  Fundamentally because of the extreme belief the Trump presidency along with complete control of Congress will meet the objectives he has outlined. Present economic data is not that good and weaker than most forecasts. The action today with the volatility may be leading into the over-due correction. If and when it comes be prepared to take all advantage you can muster. The longer trend is decidedly bearish - the 30yr bull market in interest rates is over, but we will have opportunities for those prepared. That said, do not front-run the potential of the rebound; wait for it.

In summary, the trend is not our friend.  In this market, you have to lock as soon as possible.  Even if we get a small rally, banks will be hesitant to pass along improvements.   Way too much volatility as the last couple of days have beaten us to the ground, following the last few weeks that also beat us to the ground.  It makes a limited amount of sense to float in these times, locking for the appropriate time is required as soon as possible to avoid any further volatility.  I think right now guessing when/if a reversal happens is a losers game, defense is the only strategy.