Mortgage Rates Slightly Lower

Mortgage rates moved slightly lower today, bringing them to levels seen only one other time in the past 3 years.  Even then, that "other time" was only for a few fleeting hours on February 11th.  This time around, we have been holding near these 3-year lows in much more stable fashion.  If rates are able to move any lower from here, that will put them in line with all-time lows.

US and global interest rates are now at one year lows. The 10yr this morning was down to 1.66% before rebounding to close at 1.69%. The $12B 30yr bond met with good demand but slightly less than the 10yr yesterday, nevertheless this week’s auctions were dominated by foreign investors as global rates sink and the US has higher and safer rates.

The main domestic event this week has been the Treasury auctions and very solid demand from indirect bidders. Economic data has been largely absent.  The absence of economic data turned the focus on the dollar and negative interest rates. Negative interest rates connote fear in investors, seen as a ‘last ditch’ effort by monetary policy officials to avoid depression and weaken currencies.

Two of the most noted investors, Carl Icahn and George Soros each are sounding warnings that markets are becoming too extended. Soros is back in the market after an extended period of staying away. His new investments all on the bearish side. Carl Icahn echoed Soros’ bearish outlook. Neither expect markets to collapse in the near term, as they are long term investors. Soros is buying gold and gold mining stocks, betting on inflation or safety against a global eruption in markets.

Yields at the long end including MBSs increased technical bullish readings. At these low levels hard to hold a bullish thought. Although the Fed will pass in June there are still arguments made that July is in play. Not likely unless key economic data makes a huge U-turn, the June employment report, June ISM indexes rebound and improved consumer spending and confidence.

In summary, overnight we saw the benchmark 10yr break below a key level of resistance at 1.70%, but it has run into another brick wall at 1.66%.  I advised locking yesterday, and with the improved rate sheets this morning, I think locking continues to make sense.  Depending on your timetable to close I favor floating as I feel this rally still has some legs.  However, if you are going to float, do it with caution and stay close to the monitors.