Mortgage Rates Managed To Hold Their Ground Today

Mortgage rates managed to hold their ground today.  4.125 – 4.25% remains the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios.

What do markets consider more important than profiting? Not much! The events this week with the air tragedy and Israel/Hamas did rattle markets for a day or so but it is over, at least until, or if, another shoe drops. As long as both situations remain regional and don’t drag other nations into the situations, and as long investors and traders can’t find a reason that sanctions and other potential events will change the economic outlooks and conditions in global commerce the events this week will not have a long-lasting impact. Russia and the US toe to toe, Germany and Russia toe to toe; neither has any serious impact on economic futures.

Yesterday in the usual knee-jerk moves that characterize any event not expected, and the case of the downed airliner with so many lives lost and that fell from 33K feet high, has passed quickly. Of course it is a tragedy of massive proportions but reality took control today. The 10yr rate fell to its lowest level since last May and was the lowest since June 2013. The stock market got hit, gold improved and crude oil increased. The reactions were what they should have been. When calm returned overnight and Europe’s markets didn’t implode (Europe had more time to think it through because those markets were closed); the US markets recovered much of the losses yesterday. The 10yr has rock-hard resistance at 2.46% and won’t be able to crack it as long as investors continue to ignore economic realities.

About half of US Q2 earnings reports will be out next week. The consensus in markets is that earnings will be good. So far most companies that have reported have recorded decent earnings, bank earnings very good. The geo-politics will continue in play but the most focus will be on those earnings reports. We are not stock traders or analysts, we only focus on it because of the equity markets’ influence on interest rates. Strong earnings will drive stock indexes higher and push interest rate prices lower. Right or wrong, the equity markets rule now. For a month now the idea that the stock market is set up to decline has increased; in fact there are more believing a deep correction is about to happen than believe it won’t ---- at least not now. Too many on the correction view at the moment.  Psychology suggests that when most believe one thing, the odds lessen that it will happen.

In summary, if you've floated to this point, I'd certainly wait to see what Monday brings and then cautiously adjust my plan each day moving forward. Mortgages are still trailing a long way behind Treasuries and next week brings about a lot of data that can heavily influence both. Cautiously floating into next week is my plan.