Mortgage Rates Went on a Wild Roller Coaster Ride Today
Mortgage
rates went
on a wild roller coaster ride today as the markets started off soft and then
reversed itself with geo-political issues overseas. The most prevalently-quoted conforming 30yr
fixed rate for flawless scenarios remains at 4.25%, but 4.125%
is still be courted with additional fees.
Following
the bouncing ball is always a walk on the wild side. After the US dropped bombs in Iraq this
morning, and again this afternoon, and earlier this week Russia moving another
20K troops to the Ukraine border, the run to treasuries sent the 10yr to its
lowest level this year this morning. This afternoon reports out speculating
Russia is backing off a little. It took a few hours but when it sank in and
gained momentum the 10yr note came off its low last night at 2.38% to end the
day and week at 2.42% and MBS prices fell from +18 bps to -9 bps by 3:00pm.
That is what volatility feels like, and in the end it is just one more news
flash and speculation.
The
other global angst is Iraq being overrun by Islamic State militants. The U.S.
sent supplies and dropped a couple of bombs on what is described as an
abandoned artillery site. The mid-east so far is no Ukraine/Russia episode as
the President has repeatedly said no ground troops will be involved. Iraq just
lost a huge cache of US weapons to the militants in the latest round of attacks
by the Islamic State, the government looks hopeless. The way it appears now,
all of the US lives lost in Iraq over the last 20 years have been a waste of
humanity.
We
have noted that market volatility would increase now – with today being a prime
example as traders grabbed onto anything that deviates from the last hour. At these low interest rates there is little
patience when it comes to holding long bond positions. Next week we may be back
to increased tensions between Russia and Ukraine; because one or two comments
talked about de-escalation of tensions doesn’t hold much water unless there are
continuing improvements. It is intriguing that on any positive news the markets
flip, not in itself unusual under these kinds of situations - but when stock traders come up for air with
comments that the geo-politics isn’t a major cause for the stock market’s
recent decline on a strong rally today it indicates not a lot of confidence in
much these days. This morning those same traders were all about geo-politics.
Next
week of course geo-politics will still be out there. Treasury will auction 3yr,
10yr and 30yr notes and bond in the quarterly refunding. The auctions,
especially the 10 and 30 will provide additional information about demand.
Economic reports will return and there are a number of Fed officials speaking.
In
summary, our early rate improvements evaporated quickly this afternoon as
Ukrainian Drama appeared to wane. Gains based on geopolitical strife can vanish
(or appear) quickly, and it's important to take that into account. Buyers
within 30 days of closing may want to lock up their gains today. Those with an
appetite for risk and time on their side might consider continuing to float, as
long as they understand both the risks and rewards.
Remember,
if you want to know the benefits of locking your rate today versus floating,
simply give me a call at 314-744-7806 or visit me on my website at www.CallTheMoneyMan.com. I have access to
real time Wall St. data and instant market alerts with breaking news that I
monitor throughout the day to assist us on making the informed decision.
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