Mortgage Rates Finally Moving in the Right Direction

Mortgage rates are moving in the right direction after the beginning of the month took its toll on the bottom line.   The most prevalently-quoted conforming 30yr fixed rate for top tier scenarios remains at 4.25%, with the closing costs associated with this being the only change, as 4.375% still is becoming more of a reality with no discount points, but 4.125% did breathe some life today. 

MBS prices opened better this morning then slid back a little through the rest of the session. The bellwether 10yr yield dropped to 2.56% down 2 bps points from Friday, but still unable to crack its key resistance at 2.52%. US stock indexes collapsed in heavy selling this afternoon but no noticeable impact on the bond market. Interest rates not likely to increase much from present levels, nor is there any momentary interest in buying from investors and traders. Looks like we are in for narrow ranges in MBSs and treasuries this week with markets still attempting to handicap last week’s FOMC meeting.

The stock market hit on news from China over the weekend, the finance minister saying he doubted anymore stimulus would happen in the country while its economy continues to slow.  Geo-political issues are on the back burner now. Ukraine and Russia aren’t making news that forces investors to seek safety. In the Mid-east as long as the oil markets are not negatively impacted it doesn’t look as if markets are paying much attention. That said though, the US has fallen into the usual trap when stepping into that region. No outward support coming from Turkey or the Saudis, or for that matter our usual allies. Given the US not having any constant policy in the area, support against ISIS (looks as if we want to hold that term instead of adding legitimacy to the Islamic State reference) is going to a hard sell.

August existing home sales this morning were softer than expected, more concern that any more increase in mortgage rates will continue to slow sales.  The demand for MBSs remains good even as the Fed cuts purchases.

As much as we expect a decline in interest rates over the near term, we cannot endorse that view now. The markets remain bearish now, as long as our models and other technical indicators are bearish we have to keep our slight bullish forecast on the shelf in terms of acting on it. Trading against actual market action in favor of any opinion is a path to lose. Let the actual trading tell us what to do, and when. We will at times go against the grain for a day or two as we have done this last week because momentum had rendered markets oversold and kept sellers from acting, but over-stretched markets quickly adjust on slight retracements.

In summary, floating through the weekend definitely saved you some money as rates improved. However, we need to see more improvement to feel convinced significantly lower rates are ahead. This week is data packed and cautiously floating has a chance to be greatly rewarded. As always, be ready to lock but my advice is to float into tomorrow and reassess at that time.

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.