Mortgage Rates Bracing for Tomorrow

Mortgage rates managed to hold the line with 2017's lowest levels for a 2nd day, even though underlying bond markets suggested a move higher.  Tomorrow's high-risk events certainly could push rates even lower, but there's an equal chance that rates will be heading higher.  In either case, the moves are likely to be bigger than average over the next 2 days.

Crude oil broke below $47.00 today, and I stated if that happened, expect a lot of additional selling and we got it - crude oil price declined $2.33 to $45.86. Inventory levels reported this morning showed a large increase and yesterday there were comments that OPEC may not be able to hold those production cuts. Not rocket science as there is more oil than demand.

James Comey released his prepared text today ahead of tomorrow’s testimony suggesting Trump was trying to establish “a patronage relationship” with him during a dinner meeting in January at which he sought Mr. Comey’s loyalty, according to written congressional testimony. He states after the dinner Trump asked others attending to leave but asked Comey to stay and asked for his loyalty. He states that in another meeting in February Trump asked him to back off investigating Mike Flynn saying Flynn was a good guy.  Comey agreed but did not declined to say whether he would drop it or not. On whether the FBI had an investigation on Trump/Russia collusion, Comey is saying he told Trump many times he did not have an “active counter-intelligence investigation” into him. Comey’s seven-pages of highly detailed testimony on his interactions with Mr. Trump was posted on the Senate Intelligence Committee website.

Weekly jobless claims come out tomorrow but these days the claims are less relevant. With Comey tomorrow and the FOMC next week, you might want to take a long look at today’s prices.  I still remain very bullish however. It will not be much longer before something happens that will tip the equity market over, as I expect when it happens a sell-off as much as 10% or more on the indexes. Until that event occurs though the price of stocks is continuing to increase. I do not know what or when but it is coming soon. When it does, look for interest rates to drop back to as low as 1.80% on the 10yr and mortgage rates under 4.00% for 30yr loans. In the meantime, I have to be more concerned about the near-term outlook and not pay too much attention to the future as far as taking risks with consumer mortgage loans.  Potential re-finance prospects should be kept in touch.

In summary, bond markets and investors both warily waited today for James Comey's Thursday testimony. I see more downside than upside to floating here, as I think we are ripe for a pullback to higher rates if the smoke from Comey's appearance does not lead to a fire.