Mortgage Rates Moving Higher - Volatility High

Mortgage rates are moving higher so far today.  The MBS market took away all the gains we had started to bring back on Monday from last week’s turmoil, and today, we are not starting in the right direction.  The market currently is experiencing high volatility.

This morning, we saw Weekly Mortgage Applications increased by 4.0%, led by a large jump in Purchase applications (6.0%). Refinance applications had a small gain of 0.2%. Housing Prices - the FHFA Housing Price Index increased by 0.5% in December but November was revised lower from 0.4% to 0.3%. YOY it is up a healthy 6.1%.

Today we have our 5yr note auction at Noon. Yesterday's 2yr was strong but it had no impact on mortgage rates. Probably the same case with today's auction but we will be watching closely nonetheless.

President Trump is expected to sign executive orders to basically fund an existing law that already exists that authorizes a border wall between the U.S. and Mexico. He also will announce some immigration enforcement measures as well.

In Germany, the rate that they had to pay at auction for a 30-year bond was 1.20%. Compare that to last month when the rate was only 0.64% and that tells you everything you need to know about the path of longer term rates.

In China, the People's Bank of China said it raised the interest rate on loans to 22 financial institutions via the medium-term lending facility. The result is their 10yr prices slumped and yields jumped.  This brings the January tally (so far) higher in yield than we have seen in the US.

Currently at 11:00AM, we see the 10yr at 2.51% and the MBSs still in negative territory, but not as low earlier at a -14BPS.  Nothing left today but to watch news from Trump and the stock markets - with the Dow hitting breaking 20,000 and hitting new records, but the question remains - will it close over the psychological level? I am anticipating to see increased volatility in all the markets including the mortgage rate market, hence, I do believe it would be best to lock as I do not see any benefit on floating at this time.