Mortgage Rates Moved Sharply Higher Again

Mortgage rates move sharply higher for a 2nd straight day, now fully erasing all of the improvement seen since July 1st.  The same risky, volatile overseas events that helped rates fall earlier this week are now pushing in the opposite direction. Looking at the markets today suggests investors believe a deal will be crafted on Sunday to extend Greece’s payments and keep it within the euro-zone. China’s stock markets rallied today after huge declines since mid-June, in this world where every day is the last day ever, pundits are encouraged that it is over. Monday however is another day.

Yellen spoke this afternoon, and of course said something that I totally disagree with that she has been stating for the past few months – that the Fed wants to increase rates this year – but did leave an out as she stated “I want to emphasize that the course of the economy and inflation remains highly uncertain, and unanticipated developments could delay or accelerate this first step.”  She barely mentioned Greece which was pleasant that at one official believes there is enough talk about the situation. Her speech was a preview for her semi-annual testimony to the House and Senate next week.

My advice – do not get caught up too much on current geo-economic and political events - follow the money,  do not attempt to make your own decisions. Even the money does not know, look at the volatility.

Next week will start on Monday with news from the EU (actually Sunday night). Yellen goes to the House and Senate, always key. Economic data after not much this week, increases and markets get into Q2 earnings reports in a big way. China still in the mix. Next Tuesday June retail sales, June import and export prices, and May business inventories. Wednesday Yellen, June PPI, the Fed Beige Book. Thursday July Philly fed business index, Yellen. Friday June CPI, June housing starts and permits and the U. of Michigan mid-month consumer sentiment.

Do you think this week was bad? The 10yr note yield only up 3BPS on the week and 30yr MBS prices only decreased a total of 6BPS.  The brief technical bounce never materialized - now (at least until Monday) the work is obviously bearish. I really did not trust it to begin with and mostly avoided being pulled into it. Expect more market volatility next week. Although it appears a Greek deal will develop based on market reactions around the world. Probably too much wishful thinking that Greece will fade off the radar though. Any possible agreement of any nature will not end this now.

In summary, what a wild week it has been. Rates began the week heading lower only to reverse course and head higher. This weekend we will once again get big news out of Greece which will make Monday a day you either wish you floated or wish you were locked in. Given how crazy the market has been lately it is better to play it safe and lock in before the end of the day today.