Mortgage Rates Steady Despite Geopolitical Headlines

Mortgage rates were mainly steady today as there were no significant economic reports and markets generally moved in unison based on geopolitical headlines (i.e. stock prices and rates moved higher and lower together).  With the limited movement, 4.25% remains the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios with 4.125% pushing the envelope.  While further improvement can't ever be ruled out, the last few times rates have been this low have all been good opportunities to lock.

Ukraine led the open this morning as the stock market started lower, continued to fall with the DJIA off more than 100 (125) points and the 10yr note fell to 2.45%, testing the multi-year low at 2.44%. Over the weekend the situation in Ukraine gained more momentum as weekend news programs and videos were all over the networks. Comments and condemnations came from everywhere - from politicians to the person on the street, here and in Europe.

There were no data points today.  Tomorrow June existing home sales are expected to sow an increase of 2.0%. June CPI expected up 0.3%, excluding food and energy +0.2%; the yr/yr numbers are what we want to see. The May FHFA housing price index is expected up 0.3% after being unchanged in April. It gets a nod, but not much action; the Richmond Fed manufacturing index also reported tomorrow; at 5.5 expected from 3.0 in June.

The 10yr at very crucial levels - the last time the 10yr closed below 2.44% was August 8th 2011, at the height of the economic decline.  Today the note fell to 2.46% but has held and now at 2.47%.   All of our models and various other technical indicators remain bullish, and would do so until the 10yr were to increase over 2.57%, a wide berth before we could go bearish. The near term is vulnerable; there are two things now that have to occur fundamentally, strong economic sanctions that would be seen as a negative to the US and Europe’s economies; and Q2 earnings have to disappoint. This level is very critical - it will take one or both of them to push interest rate lower from here.

In summary, increased Geo-Political tensions which normally help rates to push lower are not having that effect on the markets. If rates are not moving lower they may be remaining at low levels due to the Geo-Political tensions. If this is the case rates can move up in a hurry should tensions ease considerably. Any way you look at it floating is a bit risky at the moment.