Mortgage Rates Continue to Improve

Mortgage rates continue to improve.  The bond market still is holding well, even like yesterday when the stock market had a good day. I continue to expect long term interest rates will decline more but at these low levels it does get a little tense. The 10yr has remained in a tight range at 2.04% after dipping to a low of 2.02% early this morning, and MBS are still a positive 9BPS with two more hours till the market closes.  

Weekly claims this morning were up, but well within estimates. September auto sales are trickling out this morning with huge gains from GM and Ford suggesting September will be stronger than the strong August sales. Low interest rates and big discounts leading the way for strong sales. Auto sales the bright spot for the US economy. How long it lasts depends on how long manufacturers can keep the incentives going. The September ISM manufacturing index was barely hanging above the contraction level of 50. The report is weak as far as we are concerned and should support the bond and mortgage markets. August construction spending came in a little lower than expected.  Not much reaction to any of this news.

Tomorrow the September employment data - usually before the most important report of the month the markets do not move much. This time is different, markets more concerned about the global economic decline and the Fed’s inability to admit that it cannot increase rates after nine months of comments that a rate increase is just around that corner. No way should the Fed increase rates with what will drive emerging markets further in decline.

Sorry to get this report out early today, but skipping the rest of the afternoon and wanted to get my report out to you now than later.  Should be quiet the rest of the session ahead of the employment data tomorrow. Average hourly earnings, the labor participation rate and the U-6 employment data are keys to the September data. In hindsight with my bullish rate outlook, float or lock? The 3.5 FNMA coupon today is at its highest price since May 29th. Do not get pulled into the idea rates are going to go higher, always possible but right now all of the models and all of the techs are bullish. All that said, I do not expect much improvement today into employment tomorrow – so if you are a risk taker, float with a great deal of caution – but if these rates are better than what you thought they would be and you are happy, lock it up and not worry about it.