Mortgage Rates Moved Lower Today

Mortgage rates moved lower again today as stock markets tumbled.  The weakness in stocks was led by the European banking sector. Australia cut interest rates unexpectedly today. China’s manufacturing data was less than expected. The European Commission in its projections for the euro-zone lowered its outlook from their meeting three months ago. The dollar this morning continued its declined. These were the events that sent Europe’s stocks lower, the US stock market lower and interests lower. All of it but the currency markets were shocks to global and US markets. The 10yr note yield this morning dropped to 1.78% at one point but bounced back to 1.80% into the late afternoon trading.

More noise from Fed officials today. Just exactly like what Boston Fed’s Eric Rosengren said last week, Dennis Lockhart echoed the same tune, that markets are not properly pricing in a rate increase in June. Ms. Mester, Kansas City said that QE was no longer effective. Why in the name of god do markets pay even the slightest attention to what Fed officials spout? As time goes on the Fed chatter actually is getting less and less attention but the media continue to make a case and sweat over every word while price action in stocks and bonds totally ignore a rate increase in June….so far. Many traders and investors don’t believe the Fed will move this year. The Fed is locked into thinking that it cannot do anything that may upset markets.

April auto and truck sales were expected.  Tomorrow ADP leads off with its private job report for April. Q1 productivity and unit labor costs will get a lot of attention.  We will have March US trade deficit, March factory orders, and the April ISM services index.

US stocks were hit today, the 10yr note now right on its first resistance level at 1.80%. In the near term the stock market will set the tone and it will be driven by global markets more than earnings report. Data tomorrow and employment on Friday may keep the choppy equity markets from any directional move, pending the outcome of the data. There was no improvement in MBS prices today from the morning pricing levels. The technicals remain neutral but if bonds improve tomorrow the interest rate markets will make another run to 1.70% which is almost the low of the year.

Go into tomorrow floating, but as always, do it with caution and watch the 10yr – that has been my trigger as of late.

In summary, with all of yesterday's losses recouped today, I feel it is worthwhile to float here.   Floating will allow time for banks to pass along the gains.  It will also allow you time to see if these gains can be built upon.  After yesterday's mini sell off, I think most banks have been more conservative in passing along these gains.  They are not sure whether they will hold.