Mortgage Rates Steady Despite Weakness in the Bond Markets

Mortgage rates held steady again today, despite some weakness in underlying bond markets.  Bonds are currently pointing to slightly higher rates, yet the average lender is unchanged compared to yesterday's latest levels.  This has to do with today's trading momentum in bonds.  They pointed to higher rates in the early morning, recovered a bit, but when I was writing my morning report, the trend of MBSs started to go lower again.

March housing starts and permits were surprisingly weak compared to forecasts.  Even though the revised numbers for February were better, March numbers certainly took the wind out of the sails.

Tomorrow weekly jobless claims are thought to be up as last week’s decline was a bit of a surprise, but in all, this number has been so tight that no one is really paying attention to it.  Also we will have the April Philadelphia Fed business index, the February FHFA housing price index, and at 9:00 the March leading economic indicators.  This will be it for the data for the week.  Markets are looking now to tomorrow’s ECB meeting and next week’s FOMC and BofJ meetings.

Nothing new in the models as all techs are neutral. A little concerned that we hit 1.80% on the 10yr today as that line may be crossed.  If that happens, then the technicals will turn bearish. We have no reason now to float as has been our view for most of the last two weeks.

Lately, we have been seeing the markets tipping one way and it has not been the direction I would like to see.  With what we saw today, I have a feeling that the rates may be a tad higher (in relation to fees) if we do not budge from here downward.  The catch is that they usually do budge, but the point is that the imbalance tips the scales just slightly in favor of locking.  And the scales were already looking a bit tippy.

In summary, with rates near recent lows and some apparent resistance to further improvement, locking is a more compelling option than it had been a few weeks ago.  What about floating?  There's a place for that strategy as well, as long as you understand the risk that markets could move against you and you are prepared to lock at a higher rate if markets move too much.  Right now, I am playing defense with rates near three year lows.