Mortgage Finally Had a Winning Day

Mortgage rates finally had a winning day, but just barely.  US equity markets took a hit today, the $16B 30yr bond auction was met with good demand, and the Fed officials were out in force and more to come later today. The bond and mortgage markets were flat with literally no change from Tuesday’s close.

Getting more ridiculous every day with the Fed. It is a cluster at the Fed with some saying do it others saying maybe not and all of it in total is keeping investors and money managers twisted like a carnival pretzel. Data from Europe and Japan not good, adding more thoughts that the Fed could wait. Each day that passes from last Friday’s employment report lessens the initial reactions that the Fed will move. If you are getting annoyed with the Fed, think about those that have to write or talk about it. Why should you care? Because it is a global economy, not your grandfather’s economy. Too many still do not fully appreciate what is occurring, continuing to live in their cocoons. The Fed is not ignoring what the world is doing, regardless of its apparent lack of outward discussions.

Tomorrow markets finally get some important economic releases. October retail sales, October producer price index, and the U. of Michigan mid-month sentiment index.   

We have been expecting a little improvement in the bond and mortgage markets for the last couple of sessions. Not a trend reversal but the rate markets increased too quickly on the employment report and set up a slightly oversold technical situation. Tuesday MBS prices did improve but not worth talking about, today the same with no improvements but no more selling the last two sessions. The wider perspective remains bearish after the bellwether 10yr took mortgage rates up 20 basis points in two weeks, the 10yr note yield up 32 basis points. Why do some people keep believing MBS markets are not driven by what Treasury markets do?

In summary, rates perked up a little today, as bond markets treaded water most of the day.  The 30yr treasury auction was well received, it appears bond buyers are getting interested at current yields.  I am not ready to call for imminent rate improvements just yet, but at least we have had 2 days of improvements going.  Let us hope we close the week on a 3 day winning streak.  I'm neutral on locking long term, nothing wrong with borrowers approaching closing pulling the lock trigger here though.