Mortgage Rates Experienced Some Volatility Today

Mortgage rates experienced some volatility today, but ended up a tad better than where they started today.  At first, rates were higher, as underlying bond markets were quickly weakening in the morning hours, but bonds staged an impressive comeback with help from weak consumer confidence data and falling oil prices. 

Lots of talk about an output cut in crude oil these days as OPEC and Russia are talking but Iran and Iraq need the money. Crude is marking time in the futures markets, yesterday the February contract expired and now the March contract takes the lead. The March contract was trading about $1.60 higher than Feb. Yesterday crude oil increased $1.79 sending stocks higher, today crude declined $1.55 sending stocks lower but the price of crude has not changed in terms of the price per barrel and what markets watch.

February consumer confidence took a big dip today, and the decline is likely a reaction to the drop in the stock market in January and early February. These consumer measurements are important but must be taken in context of what consumers believe at the moment. No reason to be too concerned with the drop, the lowest level now since July of last year.

Treasury began this week’s auctions this afternoon with $26B of 2yr notes. The auction was strong. Tomorrow January new home sales, and weekly crude oil inventories, with the Treasury will auction $34B of 5yr notes tomorrow at noon.

Near term the bond and mortgage markets under some pressure - not surprising given the swiftness of the decline in rates in January. The longer analysis remains bullish but I expect more retracement in stocks that will keep interest rates in check for a while. I could spend hours and my fingers would bleed trying to put everything in perspective - and by the time I finished the situation will have changed. All this ink, all of the opinions on financial news shows, all of the Federal Reserve members - no one actually has a clear outlook because… there really isn’t any! The world in turmoil economically and politically.

In summary, bonds overcame morning weakness today as consumer confidence data failed to meet expectations, which could imply future reduced spending/low inflation.  I do not know when our current rally will end, but with pricing nearly the best since January 2015, I am locking loans within 15 days of closing.  Our last January rally only lasted a week at peak levels, why not get while the getting is good?