Mortgage Rates Steady After Ukraine Headlines

Mortgage rates started the day in weaker territory, but after headlines regarding violence in Ukraine, we saw stocks go lower and provided demand for fixed-income. The move out of stocks and into bonds is a common reaction to disconcerting headlines, and it's also common for Treasuries to soak up more of the benefit compared to Mortgage Backed Securities (MBS).   Increasing demand leads prices higher in bond markets, which translates to lower rates.  For all intents and purposes, this turn of events brought the average rate back in line with yesterday's latest levels.  That means the most prevalently quoted conforming 30yr fixed rate for best-case scenarios remains at 4.375%.

As mentioned, what started off messy in the Ukraine quickly evaporated as far as investors and traders were concerned.  The stock indexes turned back positive and the 10yr came back to where it was trading this morning.  The entire Russian/Ukraine situation is like riding a roller coaster, but so far the overall market reactions over the last week or so have not generated much more than momentary concern.

For all the angst and media hand-wringing, so far there has not been a significant reaction over the geo-political event. The treasury markets are holding well but so far no major reactions.  The stock market fell when the 10yr began to improve, that market is technically and fundamentally weak and in our opinion likely to move lower in the weeks ahead. Intraday and interday volatility is increasing in the equity markets.  

It will continue and likely even become more volatile in the next two weeks.  There is a pivotal moment not far off in both stocks and bonds and MBS.  Both the stock indexes and the treasury complex that drives mortgage rates are trading nervously now.  Either it is a consolidation in stocks before another strong run higher, or as we expect, the beginning of a serious decline.  The rate market is at its best levels unless geo-political events drive money to safety.  So far safe haven moves have been minor.

In summary, we have seen this story play out before.  Concerns surrounding the Ukraine push yields lower and within a day or two, the concerns decrease and rates rise.  Could this time be different?  Sure, but history says take any gains you get from this action, LOCK, and be happy with the gift.  We may be seeing new lows as we are on the edge, but we have yet to break through.  Hence, I recommend to cautiously float unless you are closing in the next several weeks.