Mortgage Rates Slightly Better

Mortgage rates moved slightly lower for the third straight day and have now spent 4 days without moving higher.  Like the previous two business days, the improvements were modest.  That said, they are beginning to add up. This morning there was a safe haven move into US treasuries, it was minor compared to other market shocks. By this afternoon treasuries lost morning gains as the risk aversion movement faded quickly. The US dollar however did not retreat as global investors and especially currency traders drove the dollar higher against the euro currency.

The wider outlook for the bond and mortgage markets remains bearish - the near term however is still oversold and we continue to look for additional improvements. The rebound tough is unlikely to change the trend that is dependent on the Fed in December. Currently markets on balance still expect the Fed will move to increase rates. The new issue is the terrorist attacks in Paris; any increase in the concerns add another level the Fed has to consider now. Incoming data remains for the Fed led by the November employment on December 4th. Between now and the end of November I am not expecting any significant increase in interest rates.

In summary, the benchmark 10 year note has been able to break 2.27% today, but does not want to move much lower.  We need confirmation tomorrow by holding below this key level.  Rates are marginally better today, so if you have been floating you can lock in the gains today.  I think if you can tolerate the risk, I would continue to float and see what tomorrow brings.