Mortgage Rates Continue to Fall

Mortgage rates continue to fall, but not at the same pace we saw since Friday. After declining 871 points Friday and yesterday the equity markets bounced around a little this afternoon – but this is in no way the bottom but it did stoke sentiment a little.

The bond and mortgage markets ignored the gains, it will take a lot now to turn interest rates higher for any significant moves. Nothing has changed in the EU/UK situation. Meetings today and there will more meetings in the days ahead.  Tensions and emotions running at high levels like when a girlfriend breaks up with her boyfriend.

It has now been five days since the shock of the exit vote, some cooler heads beginning to show but there is a mountain to climb and there is no certainty in any comment, video or any forecasting that should be relied on yet. The EU has been a mess and a volcano ready to erupt, if this was not the blow there would have been something else. The world, the ECB, our Fed have pasted a sheet over the structural issues that have been heating up in the EU since the Greek debt crisis. Spain, Italy, Portugal and Greece itching to find a way out although no one in any of those countries will mention it and hardly want to think about. Meanwhile Scotland is going to have another referendum vote soon that may turn out differently than the recent one that Scots voted to hang with Briton. In short, and with emphasis this is the beginning, in 2 years the EU will have a whole new face.

Wells Fargo on CNBC this afternoon saying this is a buying opportunity for US stocks? Well, I will respect everyone’s opinion but I think if there is a buying opportunity here it will come from much lower levels based on the indexes. Financial firms just have to remain bullish or their income will crash. It is very unlikely the stock market has found a bottom in all of this yet.

Overall US and global interest rates held up well given the improvement in US equities.  Smart money will stay put in the safe arms of the US Treasury. I expect more buying of treasuries and lower rates ahead but as I noted, after the huge move to safety the bond and mortgage markets may need a pause to assess more information out of the EU and Britain.

In summary, as the Brexit drama continue to play out, rate sheets continue to show some improvement.   The longer these gains hold, the more lenders will be able to pass along.  Until we get non-farm payrolls next week, economic data does not matter.  With solid support above on the 10yr note, I continue to favor floating, especially if closing in over 10 days.