Mortgage Rates Has Interesting Day

Mortgage rates had an interesting day today as they started out slow, then got better, before they settled down with a better margin than they started.  The bond and mortgage markets were under initial selling pressure this morning but when the stock market rolled over on news that Germany closed an athletic arena soccer game, it tipped equity markets that initially ignored the implications of the Paris attacks. Ahead of kickoff today, reports of a suspicious package inside the stadium prompted fresh security fears and police issued a statement less than two hours before kickoff instructing fans already in attendance to leave the stadium. Terrorist fears are not subsiding, but expanding.

Later in the afternoon when FOMC minutes from the September, it showed after the very strong September employment there was an increase in sentiment that the Fed would move at the meeting but the Fed said it would wait until December. December is on the table but the terrorist attacks may tilt the balance to wait longer, pending the November employment report on December 4th. We expect Europe’s consumer spending will slip through the holiday spending due to terrorist fears.

Equity markets initially did not take the Paris event as seriously as now, with Germany cancelling a soccer event two hours prior to kick off on a report of an unknown package found - traders and money managers may be re-thinking the threat level. I have been floating since last week, and will continue although as I have noted, it is a risky trade. Right now floating mainly on the bond market being technically oversold, the Paris attacks add a slight more reason for money to at least stay in safe treasuries for the time being.

In summary, too much Europe again as even though the US wants to do one thing, there is always outside influences beyond our control that stems to a reality check and keep the mortgage bonds and treasuries low.  Just be careful if you want to take the risk to see if there is any more reward out there.