Mortgage Rates a Little Better

Mortgage rates moved lower today, but not by much.  The stock market got tagged and crude oil is a little lower. I have mentioned numerous times recently that I expect a selling spree in the US equity markets, so far all we have had is marking time. The indexes trade lower one day, the next day a rebound - the net is that there has been no sustained movement in either direction so far. It is coming but it may take the coming earnings season before the collapse I anticipate.  Every tech I use is now weakening and many are already sending off sell signals. Corporate earnings are going to be weaker in Q1 and the global picture is not improving.

Bond market levels typically dictate mortgage rate changes in fairly short order.  Oftentimes, a strong showing in bond markets means that rates will be noticeably improved on the same day.  But that was not the case today and it has not been the case in general for the past several weeks.  Global economic concerns and financial market volatility have banks feeling hesitant to adjust rate sheets too quickly.

There is some speculation, albeit a minority, that a recession has been avoided because the dollar’s strength has softened making other currencies stronger and more competitive. That is a stretch, the dollar’s weakness recently, especially against the yen will hurt Japanese exports and dampen any positive ideas that its inflation will begin to improve. The turn of the dollar more likely due to Yellen’s speech last week that made it clear that the Fed will not increase the FF rate four times (1.0%) this year. To believe a recession has been avoided it must accompany the belief commodity prices are going to increase and inflation will show its face. That at this time is wishful thinking, I hope that view proves to be correct and my view is incorrect.

A key event scheduled at 5:30 this afternoon, Janet Yellen had a conversation with three former Fed chair, Bernanke, Greenspan and Volcker. It all happens after the closes and I am not sure what will come from it. Sounds like a fireside chat type of thing but when four Fed chairs sit down it will be a key focus.  I am sure we will hear more tomorrow.

In summary, the bond and mortgage markets are moving in the right direction.  It is a matter of time in my opinion, that the banks will do such as well.  In terms of strategy, it is never a bad idea to lock in gains if you have been floating for a while.  That said, I am definitely in the middle of a trend toward lower rates.  It could end tomorrow, or it could continue for weeks.  The only way to attempt to take advantage of such a trend is to set a line in the sand at slightly higher rates to serve as your cue to lock if the market moves against you.

If the gloves do not fit - you have to acquit!   If the techs are not bearish – it is a market to cherish. Not sure what will come out of Yellen’s conversations with the previous Fed chairs this afternoon but the bond and mortgage markets remain very positive at the moment.