Mortgage Rates Rose Modestly Today

Mortgage rates rose modestly today, ending last week's streak of 5 days without an increase. 4.25% was  the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios, but 4.125% was still in play with a little more money for closing costs.

With no direct news markets today (stocks) are being defined as going higher because Q2 earnings are expected to be better than thought last week. Got to have a reason, even if it has little credibility and tomorrow will be a different day. So far earnings are mixed, some good, some not so much. Most of the key earnings report will not be out until next week. More likely, finally retail investors are getting on board - a reason to be concerned. Then Janet Yellen goes to the Senate tomorrow and possibly will continue to talk about the weak employment situation, that kind of message encourages the idea that the Fed may hold off increasing rates longer than the bouncing ball forecasts coming from other Fed officials.

The bond and mortgage markets, while weaker today on the stock market move, still are holding well. Ukraine/Russia (Ukraine out today saying Russian forces may have shot down one of its airplanes to bolster the Kremlin-backed insurgency and sabotage efforts to end a conflict), Syria, Iraq, Israel/Hamas, the shaky banking system in Portugal. All of it helping support the treasury and MBS markets. Then there is the outlook that the stock market remains ripe to correct, even though it doesn’t want to at the moment.

When the Fed began tapering its $85B a month of treasuries and MBSs last year, there was a lot of concern that mortgage rates and treasury rates would be driven higher as increased supply would override demand. That has not happened, the supply of MBSs is lessening as the Fed withdraws; kind of balancing the supply as the Fed withdraws. MBS buyers are now facing less supply as the mortgage market slows.

Tomorrow - the main story is Janet Yellen’s testimony to the Senate Banking Committee. Prior to her appearance and her prepared text, June retail sales, expected +0.6% both overall and ex auto sales at 8:30; the July NY Empire State manufacturing index also at 8:30, expected at 17.8 after exploding to 19.3 in June fem May’s single digit reading. June export prices and import prices also at 8:30; exports +0.2%, import prices +0.4%. At 10:00 May business inventories thought to be up 0.6%.

Not a good day for the bond and mortgage markets, but not that bad. All of our work remains bullish, however given the overwhelming uncertainty about how well the economy is doing, domestically and globally, there isn’t much a lot of confidence in either the bulls’ or bears’ cases being made.

In summary, rates took a step upward today, continuing to bounce within recent ranges. The hope is that we will trend back down as we have been, but the pattern will not last forever. As the Fed draws closer to raising its Fed Funds rate, it is likely that 10yr bond yields will eventually rise, and mortgage rates with it. The biggest question is not if, but when at this point. Until the pattern breaks, looks like the play is lock on rate dips for buyers with some risk tolerance.