Mortgage Rates End the Week a Tad Higher

Mortgage rates overall this week were a bit choppy as they ended just a tad higher where they closed last Thursday (markets were closed Friday) as global financial markets braced for volatility this weekend. The 10yr note yield and MBS prices were relatively unchanged over this time. Geo-political fears subsided this week in Korea and Syria. The remaining international concern now if the French election that will occur on Sunday then a run-off of the top two candidates the flowing Sunday. As you know there is some concern that the far-right candidate Le Pen and the far-left candidate Jean-Luc Mélenchon will be this weekend’s two winners - each has an axe to grind with the EU. 

In addition to preparations for the weekend's events, traders also reacted to today's headlines concerning tax reform.  Just before 2pm, the Associated Press reported that Trump would announce his tax plan next week and that it would be bigger than "any tax cut ever."  In general, the promise of tax cuts has fueled stock market gains at the expense of interest rates.  True to form, stocks and bond yields (which correlate with mortgage rates) moved higher after the announcement.

On Monday, the markets will react to the French elections as there is no major economic reports that day.  With the Tax Cut announcement late in the day, and the down turn with the mortgage bonds. I anticipate that the market will open on the negative side than where we closed today.

Early today we got March existing home sales, which came in better than anticipated, with the largest increase since February 2007.  Crude fell today on increased US production and high inventories. Just cannot keep the price going higher and that is not a shock, if there is so much oil and demand does not increase dramatically crude prices are going to remain low. 

In summary, bonds ended the week virtually unchanged; Tuesday's gains evaporated as the week progressed.  Unchanged is hardly a bad situation, as we are still near the lowest rates in 5 months. I continue to favor floating until within 15 days of closing.   Bonds are in the green today, but with it being Friday, lenders are slow to pass along the gains.  Especially slow today thanks to the weakness of the last couple days.   There is never anything wrong with locking if you are happy with the current terms offered as it is always better to lock when you should have floated, then to float when you should have locked.