Mortgage Rates Down as Stocks Tumble

Mortgage rates moved lower today as stocks got tagged today.  The 10yr note got down to 2.10% down 7BPS from Friday and MBS prices at their highest were up 27BPS today.  Getting to be a normal occurrence - the DJIA improves one day, the next day it is down. The bond market trails along swinging with each move in equity indexes. August pending home sales from NAR this morning were a very big disappointment. It looked like the equity market selling occurred just after the sales report but the market was already weak. August personal income and spending also came in this morning, but was not anything earth shattering.

Stocks at their lowest level in a month today. Industrial weakness in China renewed anxiety about a global slowdown. Equity markets have been turbulent in recent weeks amid confusion over the Federal Reserve’s tightening policy and concern over a slowdown in Asia. In the meantime Janet Yellen and most all Fed officials continue to sing the happy song, the declining growth in Asia and slowing in Europe will not harm US growth. Two thoughts here - the Fed is sniffing the glue again, or with the US also weak comparatively it will not hurt if global growth continues to weaken. Yellen and other Fed officials want to increase the FF rate by the end of the year - I want a new Porsche Spyder, both of us are not likely to get what we want. And her continual chatter that she is worrying about inflation is wasted breath, markets completely ignore and Fed officials talking about inflation just around the corner.

To stay below its borrowing limit of $18.1T, the U.S. government is set to reduce its issuance of Treasury bills by $135B between now and December, according to Citi. Regulatory changes have increased demand for Treasury bills in recent years, so the diminishing supply comes at a bad time. Citi is also saying that the government shutdown drama will result in the Fed keeping rates on hold until March 2016.

Tomorrow the July Case/Shiller home price index for 20 cities comes out, but this data has little bearing on the 10,000+ cities in America, so the report will not have any significance.

In summary, we are back to the bottom of the current range that we have been unable to break.   Following the simply strategy, float the highs, lock the lows, it would make sense for everyone closing within 15 days to strongly consider locking.  That said, month end tends to be supportive for bonds but we do have payrolls data on Friday.  It has been pretty much very consistent going into the non-farm payrolls report.  Rates tend to worsen going into the report, which may offset the benefits of month end support.   I like locking here.