Mortgage Rates Volatile Again Today

Mortgage rates are moving higher today.  Yesterday we saw a very nice move in both the 10yr treasury and the MBS market.  That was enough to improve mortgage rates or fees.  However, so far this morning, that has completely wiped out the mortgage rate improvement from yesterday.

The European Central Bank held rates steady and extended its monetary stimulus to end of 2017; but will reduce levels after March to €60B a month ($64B) from €80B a month ($86B) that has been the case. Early this morning we saw the reaction that pushed the 10yr above 2.40% and dropped the MBS into negative territory.

The ECB’s decision suggests the bank is seeing economic improvement. The dollar declined against the euro currency on the news and euro market bond prices fell increasing the yields. As with most central bank decisions the last five years, the ECB did leave a carrot, saying; “If, meanwhile, the outlook becomes less favorable or if financial conditions become inconsistent with further progress toward a sustained adjustment of the path of inflation, the Governing Council intends to increase the program in terms of size and/or duration,” it said in a statement.

The only US scheduled data today, weekly jobless claims came in close to expectations, and the smoother 4-week average increased just a tad.  As is most of the case, there was no reaction to it as claims are no longer as much of a focus with 100% belief jobs are growing.

US bonds and MBSs are very volatile so far this morning. Prices of MBSs have ranged from -40 to -8 at Noon today.  Currently we are seeing the 10yr below 2.40% to 2.39%.

Yesterday the US stock market rallied with the DJIA up 298 points.  Yesterday the very old Dow Theory technical gave a buy signal when the industrials and transports both made a new high. DOW Theory has been around longer than anyone alive and normally is not seen much. The recent bullish stock market driven by a Trump belief that he will Make America Great Again has taken on a life that right now I am just sitting back and trying to comprehend all this - nevertheless, it is what it is. Hard for me to believe the new Trump presidency and the Republican Congress can ignite the expected growth in 2017 that markets presently expect. This is the Honeymoon phase, after the inauguration then we will see.

The bottom line is since November 21^st, we have seen overall high volatility while mortgage rates trade in a fairly tight channel.  So far today we are seeing the same pattern.  There are a number of us that are expecting now to have mortgage rates stay in the same basic trend until next weeks Fed meeting.