Mortgage Rates Slightly Upward

Mortgage rates had a slight change upward today, but only in regards to the fees charged for those rates.  What was unusual was the way the bond markets reacted today as we saw the MBSs up in positive territory and the 10yr closing at 1.73%. 

The stock market reversed yesterday’s improvements, while the bond and mortgage markets were locked into extremely tight ranges.  This afternoon Treasury issued $23B of a new 10yr note at the refunding auction. It was one of, if not the strongest, 10yr auctions we have seen in years, yet MBS prices were slightly lower than early this morning.

Tomorrow weekly jobless claims at 7:30 expected down 7K to 267K. April export and import prices also at the same time, followed by the last auction of the week, where the Treasury will auction $15B of a new 30yr bond, and traders are expecting another strongly bid auction.

Good news does not move the bond market these days, nor does bad news.  The demand or US long term sovereign debt remains strong, demand for equities based on the three key indexes is meager. Q1 earnings, a mixed bag but overall bout where analysts expected; weaker earnings and forward guidance. Earnings were Q1 expected weaker with GDP growth soft as Q1 usually is recently. Yesterday US stock indexes rallied with large improvements, there was no movement in the bond market, today those indexes were slapped back with no movement in the bond and mortgage markets. The spring is tightening.

The 10yr has very difficult resistance at 1.70%.  Support now for the 10yr is 1.80%. Not sure what will break it out but the momentum oscillators are now very slightly bullish, so slight that any selling even minor could rotate them back to neutral or bearish. I have floated recently with no losses or gains, but taking on risk with no reward is tenuous. One expects to gain on a trade whether its stocks, commodities or bonds; being at risk with no reward tilts the table against the trader that focus most attention on near term movement.

In summary, there is a saying, lock the low, float the highs.  We are currently at the lows of the recent range which suggests you should lock here.   However, tomorrow we have our final auction for the week and it is common for us to rally once the new supply has been absorbed.   That said, I would float and see what happens after tomorrows auction as long as you can tolerate the risk and afford to be wrong.