Mortgage Rates Hit Three-Week Highs
Mortgage
rates did
not like what happened today with Wall Street and the FOMC announcement as they
have hit three-week highs after teasing us when rates dipped into the
three’s. The most
prevalently-quoted conforming 30yr fixed rate for top tier scenarios was pushed
a bit as 4.0% is still there depending on various
fees, but 4.125% is now back into the picture.
As is always the
case after the statement is released, a lot of volatility and discussion about
the meaning of it to the markets. Trading
in the first minutes after the statement had a lot of movement as the MBS took
a big hit, but resided by the end of the afternoon. It's important to
understand that the Fed ending QE and today's rise in rates are not in a direct
causal relationship. Market participants unanimously agreed that today would
mark the end of the Fed's third round of quantitative easing (QE3) and that
part of the announcement was no surprise.
The next event now, besides the
continuing economic reports, is the mid-term elections. Will Republicans gain control in the Senate?
Will it matter to markets or the political stalemate in Washington? Probably
not, it is unlikely any serious legislation on any issues will get passed and
signed by the President, so the next two years should be more of the same we
have had the last couple of years.
Now that the FOMC is behind us,
markets will turn to tomorrow’s advance Q3 GDP report at 7:30am. The advance report lacks some of the third
month’s data, it is always revised, nevertheless traders will react to it.
Weekly claims tomorrow expected down 3K to 280K, claims have been declining the
last six weeks after hugging 300K for a month.
The 10yr yield ran up to 2.36% this
afternoon on the FOMC news but did fall back to 2.33%. The 10yr is
now above its 20 day average and when it ran to 2.36% at the 40 day it held.
Interest rates have increased 9 out of the last 10 sessions. Technicals
are now bearish with the Fed more optimistic about the economic future. The
yield on the 10yr now trading where it was on Oct 8th, between now and then a
swing of 50 basis points in its rate. Seen simply from a technical
perspective it suggests interest rate markets are confused about the economic
outlook and global economies and interest rates regardless of what the dally
chatter is---including our own.
In summary, the Fed came out a bit more upbeat in
it's assessment of the future economic picture while ending outright purchase
of bonds and mortgage securities. Pricing worsened somewhat today but not as
much as might be feared. This makes me ambivalent in my opinion on locking
except for short term locks (less than 15 days) where I still think locking is
appropriate.
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.
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