Not A Good Day For The Mortgage Markets

Not a good day for the bond and mortgage markets. A particularly vicious wave of selling hit the U.S. Treasury market between rights after the opening bell all the way up to late morning.  The selling was focused in the 10yr note and 30yr bond. The stock market rallied today with attention on the NASDAQ testing 5000.  It has been 15 years since the index traded there - thanks Apple.

The bond and MBS markets turned negative on Feb 6^th – and since then I have been warning since then that the trend has changed and floating was too much of a risk, betting that rates would decline.  Even though I have suggested many times to cautiously float, I was always warning that it was too volatile to stand put and hoping for the best.  The 10yr settled today at 2.09%, up 9 basis points in rate - the recent high yield hit 2.14% two weeks ago before a slight rally took it back to the 2.00% level that presently is a brick wall for the note. This morning I suggested keeping locked today – and if you followed my lead you did not get caught in the re-pricing today.

China stepped up to lower interest rates today. The Chinese yuan hit a 2-year low overnight, as the People's Bank of China reduced its benchmark interest rate by 25 basis points to 5.35%. 5.35% against US 0.25%.

Tomorrow the only scheduled report is the Feb auto sales - reports from companies revealed throughout the session.

Over the weekend Warren Buffett sent out his investment letter, a huge tome that took a while to read. Buffett is not as bullish as he has been the last few years.  He said the next CEO of Berkshire Hathaway would have to face the “the ability to fight off the ABCs of business decay, which are arrogance, bureaucracy and complacency.” Recent talk that Buffett is ready to retire got a lot of ink - he reiterated his successor is on the current board, two names keep surfacing. Not concerned about who will take over as much as his recent comments about the economic future.

In summary, mortgage rates worsened some more today. If you absolutely cannot afford or stomach the possibility that rates may rise some more, you should lock your transactions in now and not worry about it.  With today's rise in rates, we are really testing the range and a move higher is a very real possibility.  I also do not like to float during the Jobs Report Week as that figure always turns my stomach.