Mortgage Rates at Lowest Levels in Two Weeks

Mortgage rates fell to their lowest levels in roughly two weeks.  Once again intraday volatility was the recurring theme in the bond and stock markets. Key indexes were weaker this morning with the DJIA down, the rate markets improved with the 10yr yield down to 1.81% where we have very strong technical resistance and MBSs a positive 17BPS.  But then in the afternoon, we saw the reverse as the 10yr closed at 1.84% and MBSs mainly flat.

OPEC and the ECB meet tomorrow.  ADP will report May private jobs and weekly claims. With these two events and Friday’s May employment data, it is not unusual that the bond market should be on the defense with the 10yr and MBSs trading at substantial resistance levels. What was a surprise was that treasuries and MBSs improved this morning.

Crude oil is running the stock market and stocks are running the bond market along with oil.  At 8:30 this morning crude was down $1.11 while bonds were rallying and stocks weak. Crude began a march upward, stocks followed and interest rate prices declined. This afternoon crude up $0.80. OPEC meets tomorrow, expectations are for no new changes in output but when OPEC meets there usually is a lot of fireworks and comments from members. The ECB meeting tomorrow is also not expected any change in their QE, but again Mario Draghi’s press conference at about 10:30 tomorrow will be closely monitored for clues, not much different than our FOMC and Janet Yellen’s press conferences.

While I have suggested for most people to lock for the past ten days, for those who floated it has been rewarding – but right now there is so much risk that unless you monitored it as much as I do, locking is the safest bet.  The point is, I have been mentioning the risk and said I did not expect much movement – with the little return we have seen in the past two weeks, I wonder if it was worth the anxiety?

In summary, with rates still holding inside their recent range, there is very little reason to float.  Friday's employment report can always be a game changer, but I am of the opinion that rates have yet to see their lows for the year.  That said, if you like to place the bet, it might be a gamble, but only if you can afford to lose.