Mortgage Rates Holding Steady - Facing a Volatile Week

Mortgage rates held steady today.  Once again, weakness in global equities markets provided a benefit for the bond markets that drive mortgage rates, helping to reverse moderate weakness from earlier in the morning.  The most prevalently quoted conforming 30yr fixed rate for best-case scenarios still is at 4.5% 

Finally a housing report that is encouraging.  It is by and large the only strong housing report we have had for months.  Pending sales were the first gain in nine months - yes weather through the winter did drag down sales, but nine months is a long time in the housing sector. It has always been housing that has led the economy out of recession, if that is the case now we can expect continued very slow growth.  

The stock market is trading with increased uncertainty - the wild intraday swing today is a confirmation of how investors are increasingly more sensitive to any movement.  By the end of the session the indexes did manage a comeback. When we see this kind of intraday and interday swings it is a powerful indication that the bullish bias is slowing. The wide swings as today drove the bond and mortgage markets to follow - the 10yr went from 2.70% to 2.67% and at 4:00 back to 2.69%.  

The volatility will likely continue through the week with the FOMC policy statement on Wednesday; the Fed will continue tapering at the meeting, cutting another $10B from its monthly interest rates support. Although that is the overwhelming consensus, any time the FOMC meets it generates a lot of speculation. After the meeting the focus will turn to the employment data for April released on Friday. ADP will report its private jobs data, the current estimates are for an increase of 210K, the number of private jobs is increasing slowly. The BLS is estimated to show 215K non-farm jobs and 213K private jobs; the good news is government jobs are not adding to the employment gains recently.

As noted, today was marked by volatility. That may be the case now through the rest of the week with the FOMC and April employment out this week. The 10yr note is glued to 2.70% within a few basis points in either direction. All technicals we use are neither bullish nor bearish, that should remain the case this week unless Ukraine tensions increase—one reason rates are so stable and not increasing.  Ukraine is a day to day event, it cannot be successfully handicapped and it won’t likely be calm for months, or even longer.  It is one of those old type Mexican standoffs; Russia and the West testing each other’s will and the strength to hold the line while sanctions hurt Europe and the US and drive the Russian economy down---who will blink first?  

In summary, volatile action in rate markets today as we see-sawed from lower to higher rates, then back down again. Pending Home Sales for May were up over April's but down from a year ago, which caused some of the movement. Friday's NFP jobs report looms, and rates typically worsen during the week the report is released. If you're nearing closing, great day to consider locking. It takes a gambler's attitude to float this week.