Mortgage Rates Continue to Move Lower

Mortgage rates move lower again today following last week's U.K.'s vote to leave the European Union.  Indeed it is hard to turn on the TV, computer, or radio without hearing about Brexit.  Global stocks continue to reverberate.  There's no telling how long this "initial reaction" period will continue and what the longer term effects will be, but for now, the short term effects have been strongly positive for rates. 

Tomorrow the EU will hold a summit meeting to talk about it; what it will mean, how will it unwind, how can the UK still participate in trades, what other countries are on the edge?  Since Friday here in the US it has been easy as there is a selling of stocks and moving into US treasuries pushing MBS prices higher.

News from the EU and UK continue to evolve and will not end anytime soon. Right now there is only uncertainty and no reality. This is leading towards a very volatile interday trading cycle in the weeks ahead as markets gather some kind of kind of pseudo- reality. The EU will see economic softness in the months ahead even with the most optimistic plans to make the divorce more palatable.

Last Friday morning the bellwether the 10yr note at about 4:00 am EDT dropped to 1.41% before rebounding Friday and opened at 1.53%.  Today it closed at the lowest levels ever recorded at 1.43%.  I do believe we are heading lower as we will test new ground in the next few days, if not tomorrow.

Tomorrow there is no domestic data. Economic data coming will not carry the emphasis that it normally does, as the UK/EU will trump the past outlooks now. The Fed cannot increase rates. Before the UK we were of the opinion the US economy was slowing - not a lot but enough to keep the Fed at bay.

In summary, we saw that some of the banks improved on the rates we got for our customers, but there is still much more to give in my opinion as I do not see all the recent gains in these rates.  For this reason, I am going to continue to recommend to float.  Right now data doesn't matter, it is all about Europe and that drama will continue.