Mortgage Rates Reveresed Course Again

Mortgage rates reversed course today, heading back toward the higher levels seen earlier in the week.  It was a volatile day today as MBS prices were positive right from the open and the 10yr was down pushing 1.86%.  The data this morning really did not drive the market one way or another, but all of a sudden – BOOM!

It is no mystery that rates have been paying attention to stocks and oil prices more than normal and thus not much of a surprise to see rates begin moving higher after stocks and oil did the same.  The bond markets that drive mortgage rates were very positive before they weaken significantly in the afternoon.  This morning was somewhat an unexpected price improvement just as yesterday’s selling was also unexpected. Strange markets the past couple of sessions.

This week Fed officials, at least those that were speaking, were more hawkish about another increase in the FF rate.  The week marked by volatility, maybe some of it due to the attacks in Brussels but also due to Fed speakers unsettling the view that the next move higher for the Fed would not happen until later this year. One Fed official even bringing April into the talk. February existing home sales on Monday were down over two times weaker than forecasts, as new home sales were better than estimates.

Good Friday is not a federal holiday in the U.S., so the Bureau of Economic Analysis will release its second and final revision to fourth-quarter gross domestic product data at 7:30AM tomorrow morning. The consensus is that GDP increased unchanged from the preliminary release last month. With all US markets closed traders and investors will have to chew on it until Monday.  For the week, we saw the 10yr increase to 1.90%, MBS fall 48BPS, and crude was up and down, but settled in at a positive $0.30.

Next week Europe will be closed on Monday. Here on Monday February personal income and spending, February pending home sales and Treasury begin the week’s auctions with $26B of 2s.. Tuesday Treasury will auction $34B of 5yr notes, March consumer confidence index AND Janet Yellen will speak at the Economics Club of NY. Wednesday $28B of 7yr notes auctioned, March ADP employment data. Thursday March Chicago purchasing manager index. Friday March employment data, March auto and truck sales. March ISM manufacturing index, Feb construction spending. Through the week more regional Fed presidents will speak but Yellen’s speech on Tuesday will carry the weight.

For the week, we saw the 10yr increase to 1.90%, MBS fall 48BPS, and crude was up and down, but settled in at a positive $0.30. The rate market is still technically bearish, testing the key level of resistance this week at 1.85% but each time driven back. Next week’s data and Yellen’s speech on Tuesday, along with March employment will be key, if the data and Yellen do not break 1.85% for the 10yr both MBSs and treasuries, I expect the 10yr and mortgage rates will begin another move higher in the rates.

In summary, bonds sold off and rates worsened today. Bond markets closed early (and are closed tomorrow as well for Good Friday), and extended weekends often include bond selloffs and/or rate sheet price worsens.  Treasuries are still below their 1.95% resistance line, which is encouraging.  It is a long time until markets reopen on Monday, who knows what drama might unfold by then.  Generally speaking I think rates are due for a dip, and am optimistic next week’s data, along with global economic & geopolitical uncertainties may create a catalyst to better rates.  As always, only float if you can afford to be wrong.