Mortgage Rates Improve to Last Week's Levels

Mortgage rates fell today, undoing enough of this week's damage to return to the levels we were seeing last week.  After seeing a constant increase in the mortgage bonds for nearly eight days, we have seen with the improvements from Monday and today to offset this push.

Rates benefited from this morning's economic data.  Specifically, the first reading on Q4 GDP was weaker than expected.  Weaker economic data tends to push rates and stock prices lower. This is the first of three looks and likely GDP will be revised higher when it reappears next month; nevertheless annual GDP for 2016 stands about +1.9%. We also got a report that durable goods were much lower-than expected in December.  

Treasuries and MBSs were supported today on the soft data this morning but there really is not any driving force that would suggest any noticeable decline. Minor strength in the dollar today, but it too has not moved much.  

Pres. Trump and British PM Theresa May met this afternoon. A nice cordial  meeting as would be expected. A lot of happy talk and agreements about the US/UK trade pact that will likely happen soon. May said they both reaffirmed their commitment to the North Atlantic Treaty Organization, which Trump has previously called obsolete.

Next week is a big week in terms of key data, as January employment will come out on Friday. The first week of every month is critical – as jobs sets the stage for everything else that is reported.

Overall, no change in the mortgage rates or the 10yr this week.  Increased intraday volatility like we saw Thursday define how thin the MBS market is, and not likely to increase anytime soon. The DJIA broke 20K on Wednesday then laid an egg yesterday and today - no follow-through. Wall Street salivating over the prospect that small investors will now jump aboard after the psychological level broken but from my view the lack of any follow-through keeps me from getting on the train. Interest rates likely to stay in the present ranges next week with the bias remaining for higher rates - easier now for rates to increase than decline.

In summary, a surprise miss on GDP sent rates lower on the day.  Overall a good shift on treasuries, but we need to see a few more days like today to feel optimistic enough not to lock.  Locking is still the best option for all purchase loans with a 30 day horizon to close.  On a positive note, if we start to reverse course from here, it could be a good sign as we never tested 2.60+ on the 10yr Treasury during the recent sell-off.