Mortgage Rates Moved Sideways Today

Mortgage rates moved sideways as the interest rate markets spent the day tracking the stock indexes.  . The most prevalently quoted conforming 30yr rate for top-tier scenarios at 4.5%, whereas it had threatened a move to 4.625% on Thursday and Friday.

There were no scheduled economic reports today – as most of the trading was based on what now can be considered a tenuous stock market.  Slumping equities markets and some circulation of geopolitical risk headlines helped bond markets move back into positive territory today. What's 'positive' for bond markets is generally good for rates, though it depends on the extent to which Mortgage Backed Securities (MBS) are participating.

That's an important distinction at the moment. While MBS generally move in the same direction as US Treasuries, there has been more volatility in that relationship of late--largely thanks to last week's FOMC news which showed Fed members expecting the first hike in their key policy rate to come slightly sooner than previously expected and to result in a slightly higher rate by the end of 2015. Of course that's a long way off, but financial markets adjust pricing of relevant securities in the present based on those changing expectations for the future.

The technicals on the 10yr are currently neutral.  . How long that condition can last is becoming more of a concern. The note has traded most of the time since the end of January between 2.80% and 2.70% with a couple of forays lower but in each case trading under 2.70% was not sustained. The spring is coiling and will lead to rapid selling if the note closes above 2.80% or below 2.70%.

In summary, last week was the selloff  that took us to the high end of the range and floating could pay dividends, but you should do so with caution. Today, we are showing support at these levels and I'm feeling more confident in that stance. Floating has the potential to save you money, but always be ready.