Mortgage Rates a Bit Jumpy

Mortgage rates are a bit jumpy thus far this morning.  Early this morning we saw the MBS prices move into positive territory by as much as 20BPs and as low as a negative 4BPS, and at 11:00AM stands at +3BPS.  The 10yr did dip into 2.3 area but is currently holding at 2.40%. 

There is really no reason for all this jumpy movement as the reports were not at all on what was anticipated, as the Weekly Mortgage Applications fell -2.7%, led by a drop of -3.0% in Refinance Applications. Purchase Applications dropped -2.0%.  The FHFA House Price Index for January was flat compared to an increase on what was anticipated.  YOY the housing market has gained 5.7% in value versus a 6.2% pace in December. Existing Home Sales were a mixed bag as the number of units was lower than anticipated in February, but the YOY gain was 5.4% which is a nice uptick from January's YOY reading of 3.8%.

So, the reason must be the news on the House is set to vote on the healthcare bill tomorrow, now dubbed as RyanCare.  The prognosis is not good that it will pass - with several Republican conservatives already at odds with the bill. Then even if it does pass the Senate will not go along with it as it is presently structured. That leads to months of debate and politicking and in turn will delay any tax cuts and fiscal spending. Reality has set in that even though the political landscape has undergone a major shift politics remains a Washington truism - nothing of the magnitude that Trump has promised will happen quickly, and that within the Republican party there are serious divides. The result, money leaving equities and searching for a momentary respite.

Does this sound familiar?  You have seen many times that I have been stating that the stock market is overbought and some pull back is likely. I doubt the strong bullish undertone will change but at current levels and the reality that the benefits promised will not occur soon – and may not even happen this year!

As I see it, we will have another day of mortgage rates moving sideways to slightly lower, but the build-up is starting to become more volatile.  Proceed with caution on floating unless you are about to close as there will not be any big gains -unless something major happens and the vote passes without hesitation.  slightly lower.