Mortgage Rates Did Not Move Up Today

Mortgage rates did something they have not done on any other day so far this month.  They avoided moving higher.  While that was a welcome change, to be sure, today's rates did not move any lower on average.  This keeps them in line with the highest levels in nearly four months.  The journey has been a quick one as well, with the spike from 6-month lows to 4-month highs happening in just under 2 weeks. 

Tomorrow US banks will be closed - the stock market and other markets however will trade normal times. Veteran’s Day, only your government pays tribute. Still a bearish trend but we expect some consolidation at these levels with some price improvements. Not enough improvement though to make it worthwhile to float unless you can profit from small gains.

No main economic data so far this week, and there will not be any until Friday when we see October retail sales and the producer price index. There is not any inflation on the near horizon but markets still buffeted by comments from various regional Fed officials saying it is close. Not sure what they see but globally and domestically the idea inflation is close is wishful thinking at the Fed, especially with the regional Fed presidents. There is no pricing power anywhere; crude may increase sometime but it is not in the cards now or the next six months at least. Slower growth and extreme debt will keep inflation low.

I expect a bounce in prices soon - the bond and mortgage markets have for the moment over-run the reality on the Fed’s potential increase in rates next month. An increase is likely based on the October employment last Friday but rates across the curve have gotten ahead of themselves in the short term. That said, any bounce will not change the wider bearish bias as long as markets are convinced the Fed is going to hike the FF rate.

In summary, the selling spree in mortgage bonds came to an end today and the 10yr yield is now back under 2.30%.  This is very good news for rates going forward.  Sellers are done selling for now and buyers are entering the market and picking up much more attractive yields than were available a week ago.  With no trading tomorrow we might see better pricing soon, but it is yet to volatile to make the suggestion to float.