Mortgage Rates Settling Down

Mortgage rates seemed to settled down today - a little more civil compared to the last three days, except for the currency and oil markets. The dollar is continuing to decrease and oil is giving back most of its recent decline. Stocks are doing their thing, another triple digit day for the DJIA. The bond and mortgage markets compared to currencies and stock put in a quiet session - both saw a little improvement but not the kind of swings we saw yesterday and Wednesday. When the Fed speaks markets erupt. There were no economic measurements today.

The Fed worries that the economy may not be growing as the Fed thought at the last FOMC meeting. The data from January and February was mostly disappointing compared to what economists were expecting. That though has had no impact on US equity markets or the strong forecasts for the economy. The Fed will wait longer to begin increasing rates than what was expected. There is no inflation, that adds support for the fixed income markets. Money is looking more seriously at Europe these days as a place to invest after the ECB QE; lemmings running. There is a broad-based rally as the dollar stumbles vs. the euro on speculation Greece will receive an infusion of bailout money.

Next week’s data with February existing home sales, February CPI, February new home sales, February durable gods orders weekly claims, and the final Q4 GDP and U.of Michigan consumer sentiment index. Also next week Treasury will auction 2s,5s, and 7s.  Just when the markets are about to settle down Fed officials are likely to re-start confusion.

This week  the 10yr note yield declined 19 bps and MBS pricing went up 106 bps.  Everything still a go for the bond and mortgage markets. Our work suggests improvements in the next week or two unless the 10yr moves back above 2.03%. Attempting to forecast markets now focusing on all the changing underlying fundamentals is difficult if not futile. Best to make judgements based on how markets are trading than to making all those fundamentals that in the end we can twist any of them around to provide whatever outcome we want to see, but no ignoring markets themselves. One caveat though, markets can change rapidly these days.

In summary, now that we've dodged the bullet of a higher than likely interest rate increase on the near term (for now), mortgage markets seem to have breathed a sigh of relief and pricing remains attractive with risks abating somewhat. It feels like rates will probably stay within a small range until we get some further impetus that will take us in a defined direction so floating longer term locks for now seems safe. I would still be less picky in the short term (15 days or less) and take any day with improvements as a chance to lock in. As always, this is my opinion and you should weigh your own risk factors on accepting these great rates or fear for the worst.