Mortgage Rates Moving Up

Mortgage rates moved slightly higher again today.  4.25% was still the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios, as 4.125% fades as more money is needed for closing costs.

Kind of a strange session today.  Janet Yellen in her testimony this morning and the Q&A left markets confused. That is probably want she tried to do. Comments that were cautious on the quality of employment, comments on the economy that it was still not on solid footing but is improving, comments that led markets to believe the equity markets are not in bubble levels and specific comments on the viability of tech stocks and small caps; what happened to free markets? They went away when the Fed started managing markets back in 2008 after the bank failures, and the Fed’s inability to get the reality that making no-doc loans and no appraisals was a path to disaster. Never since the BIG WAR has the Fed been so directly manipulating markets with all the comments and opinions running through the Bank. Policy at the Fed is so data dependent that they act like day traders in their remarks; every data point at times seems to change what the Fed and the ECB are thinking. Minutes from the Fed’s June meeting, released last week, showed some policy makers were concerned investors may be growing too complacent about the economic outlook and the central bank should be on the lookout for excessive risk-taking: Yellen sounded like she was echoing the minutes, reiterating the Fed’s concerns.

 

Markets moved around a lot today but are going to end the day about unchanged. Most bond analysts and Wall Street economists continue to expect interest rates will increase sooner than trying to read the tarot cards laid out by the Fed. The 10yr note rate ran up to 2.56%, then rallied to 2.52% before settling down unchanged. The stock indexes, especially the DJIA rallied sold off then returned to unchanged after inability to understand Yellen today. Tomorrow she will re-appear at the House Financial Services Committee; maybe she will have read the reviews and alter somewhat; don’t hold your breath though.

 

In summary, we are still close to recent lows, and without at any compelling data on the horizon, if you can tolerate the risk, I think floating all loans overnight is the way to go. It appears we have some good support just overhead on the benchmark 10 year note at 2.57. Float the highs, lock the lows.