Mortgage Rates Moving Higher

Mortgage rates have been moving higher, in general, this week after the big declines since the UK vote on 6/23. When the vote shocked markets all kinds of fear gripped money managers, banks and investors. No one expected the Brits to vote to leave, once they did (by a narrow margin) it caused concern. Not being at least a possibility there were no thoughts ahead of the vote about its long term implications. Still a lot of uncertainty but more for the longer term than the immediate time frame. At the same time, US economic releases since 6/23 have been generally better than forecasts and so far earnings from banks in Q2 have surprised to the upside. Beside the data, Treasury auctions were poorly bid except the 30yr but the following day the 30yr bond took a heavy hit.

Today better June retail sales, industrial production and factory use carried the support while the weak U. of Michigan sentiment index and the NY Empire State manufacturing index pulled the other way.

 Rates are rising. The jump this week has had several propellants. However, this bounce has questions out there - will this go back down, and if so when? Economic data says “not soon:” since the rate plunge intensified upon Brexit, essentially every new US point of data has been stronger than estimated - jobs, ISM indices, small business, retail sales, the works.

Next Week: Monday NAHB housing market index. Tuesday June housing starts and permits. Thursday weekly claims, July Philadelphia Fed business index, June leading economic indicators. There will be no Fed speakers next week, whew; lock down until the FOMC meeting the following week.

The 10yr today increased to its major technical support at 1.60%. If the 10yr breaches 1.60% the next technical support is 1.70%. No other way to look at it - techs are bearish and will take a big improvement on the 10yr to even test the bearish bias. For now, it is a day today decision. With the FOMC meeting on the 26th (a week from next Tuesday) price improvements are possible but not by much. Next week will also hold the Republican Convention and will have a lot of comments about the FOMC - no increase now but economists and analysts will be wading in the waters with opinions worth ignoring.

In summary, a vast majority of my clients have locked.  The losses we have seen over the past couple of days have done their damage.  All of my floaters were qualified at higher rates, so this is gravy for them.  One client insisted on locking today, and I am happy to take the unease of floating off the table for them.