Mortgage Rates Slightly Higher

Mortgage rates were just slightly higher on average for a third straight day.  Much of this week was spent focusing on the effects of China's decision to (sort of) stop manipulating its currency.  That was good for rates on Tuesday.  As soon as China (sort of) started manipulating its currency again, rates began moving higher.  If you need to catch up on that, we discussed it in more detail yesterday.  Long story short - there was some drama that resulted in low rates, and once the drama ebbed, rates moved back up.  July retail sales, PPI, import prices, industrial production and factory use resulted in a mixed picture for the present economy and keeping traders guessing on when the Fed will increase the FF rate---September or December.

The Greek mess that roiled markets for months is getting closer to a near term resolution - kicking the can farther down the road to eventual default unless Greek debt is re-structured. Greece owes more money than it can pay even if it gets the current funds. The IMF has said that it cannot commit to new bailout loans until the euro-zone has taken steps to make Greece’s debt sustainable.

Next week housing data will be the key reports; NAHB housing market index on Monday, Tuesday July housing starts and permits, Thursday July existing home sales. July CPI rounds out the key data points next week. Treasury will have no borrowing - this week Treasury sold $64B of 3s, 10s, and 30s, the 10yr auction had very little demand compared to previous 10yr auctions.

I continue to hold a slight bullish bias for mortgage and treasury rates but the clock is ticking. Investors and traders only interested in treasuries as a safety move - as long as the US equity markets withstand selling the demand for low rates is minor. Technically speaking the bellwether 10yr tested our resistance at 2.23% today and it held.  Best I can say on the positive side is we have now moved to a neutral outlook, but still believe there will be no rate increase by the Feds this year. Data dependent as Yellen echoes - as long as there is no fear factor out there and stocks hold up interest rates have little chance of declining much more from present levels. On the week no change in mortgage rates.

In summary, rates were largely unchanged today, despite MBS wandering higher/lower before closing flat. It appears Chinese monetary drama is no longer a large factor, which puts bonds back in the "what will move us next" holding area. Rates are still better all but a few of the last 30 days, which looks like great logic to lock. If you float, remember that gains can vanish as quick/more quickly than they appear.