Mortgage Rates All Over the Place

Mortgage rates ended the day all over the place as volatility was evident in the market.   The most prevalently-quoted conforming 30yr fixed rate for top tier scenarios remains at 4.125%, with the closing costs associated with this being the only change. 

Another technical test of key support for the 10yr at 2.45% - yesterday it increased to 2.45% then rallied after not going above it. Today the note opened at 2.42% then declined to 2.40%, yesterday’s close.  By the end of the day though the rate back to 2.45%.  The set up for tomorrow’s employment report could not be clearer - on the report either the note will decline or if it breaks above 2.45% and holds into tomorrow’s close we can then call this the beginning of a bear market move that will set a target to 2.57% over the next week or so. The usual fly though is Ukraine, although we believe the fear of whatever will come out of it is much less now than in the last six weeks.

The present estimate for non-farm jobs is 230K with private jobs revised a little lower after the weaker than expected ADP report this morning (215K expected). The stock market tried to rally this morning but lost all upward momentum this afternoon. Investors and traders fearing a strong employment report will force a Fed move to increase the FF rate sooner than what most currently think. As we have noted previously, the expectation for when the Fed will begin increasing rates depends on the last economic report; tomorrow’s data the most critical of all.

The European Central Bank unexpectedly cut interest rates and announced a bond-buying program. Markets were not expecting Draghi to cut the base rate, most traders were expecting more QE. The move by ECB is an effort to stem the decline in inflation that is leading to deflation. The euro system will “purchase a broad portfolio of simple and transparent securities” and euro denominated covered bonds, ECB President Mario Draghi said in a press conference. Euro-area inflation declined to 0.3% last month, far below the ECB’s 2% target. Draghi said details of the program will be announced after the October rate-setting meeting.

The ISM August services sector index at 59.6 this morning was the strongest reading for that sector from the Institute for Supply Management since August 2005 when the economy was at its hottest before the crash.

In summary, rates increased a bit today after the release of the ADP data. Traders are positioning themselves ahead of tomorrow NFP report. Should the numbers beat we will see rates increase further. However if the number come in below expectations we could actually see rates decrease. One thing is for certain and that is if you are conservative in nature you want to be locked in today before tomorrow morning roller coaster ride.

Keep a strong look at the markets and continue to cautiously float if you do want to take a risk. 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.