Mortgage Rates Did Not Do Much Today

Mortgage rates really did not do much of anything after the volatility we saw yesterday.  The 10yr Treasury is holding its own at 2.06%, down 1BPS from this morning’s open, and MBSs closing out the day at a negative 9BPS.  Crude oil is the focus currently, the stock market sees it as a reason to go after emerging markets on the idea that higher oil prices lead to higher commodity prices that lead to improving emerging markets. That is today’s talk, it is meaningless overall but the media has to have something to substantiate any movements regardless of how minor. China has been closed this week, re-opening tomorrow. The US bond and mortgage markets are welded to equity market swings, it was graphically demonstrated again today.  From a day to day perspective it is difficult to assess. The longer view tough is still bullish for interest rates and bearish for equity markets, here and globally.

Treasury sold $21B of 10yr notes this afternoon, re-opening the 10yr issued in August. Overall we call this an OK auction at these low levels, foreign demand solid with US rates better than in other first tier economies but less demand overall.  August consumer credit less than expected - good news for retailers and a somewhat bright spot for the economic outlook on the surface. More optimism in consumer spending….or a sign consumers are back living on cards as the economy struggles, take your pick.

Tomorrow we get weekly jobless claims - no big deal these days as we have been in a very tight range for the past several months. The Fed will release the minutes from the Sept FOMC meeting at 1:00 pm. Treasury will auction $13B of 30yr bonds re-opening the bond issued in August. This week China has been closed and there has been little in the way of key domestic data points.

In summary, we have been in this tight range for several weeks now riding the markets with any sign to assist the push one way or another.  Last Friday caused a big stir, but that has been somewhat erased with no clear definitive direction up or down.  That being said as I have no idea how equity markets will trade tomorrow, and since the bond and mortgage markets seemed to be joined at the hip, I will continue stating that if you want to cautiously float, just gage the risk versus the reward as we have seen this turn quickly one way or another, and I would not want to ride this up.