Mortgage Rates Retreat on News About OPEC

Mortgage rates stopped moving downward this afternoon and retreated following what was being reported by Reuters regarding OPEC.  It stated that OPEC has agreed to cut oil output for the first time since 2008. According to Reuters the Saudis softened its stance against Iran. Two sources in the Organization of the Petroleum Exporting Countries said the group would reduce output to 32.5 million barrels per day from current production of 33.24 million bpd. That represents a strategy shift for Riyadh, which has said it would reduce output to ease a global glut only if every other OPEC and non-OPEC producer followed suit. Iran has argued it should be exempt from such limits as its production recovers after the lifting of EU sanctions earlier this year. The reaction sent oil prices shooting higher this afternoon. You know what I think, in the end I seriously doubt OPEC will actually cut output. The Saudis are facing budget deficits, Iran somewhat better but still needs US dollars badly, the other producers not OPEC members (the US and Russia) are not a party to any deal at this point. None of this will happen officially until OPEC meets again in November. This afternoon oil prices increased over $2.00, almost all of it short-covering on high leverage futures contracts. 

Janet Yellen told the House Financial Services Committee that banks in the US are in good shape and most all regional banks have increases capital. She said low rates are a hurdle for banks’ incomes. Of course she is the reason for the low rates - Chicago’s Charlie Evans said today low rates are not a creation of Fed policy but rather a symptom of sluggish global growth. Yellen repeated recent commentary in which she noted that the majority of her colleagues saw the need to raise rates as the job market continued to improve.

Another soft auction was the new regarding the 7yr Treasury Bonds.  Not as much as the previous two days, but still soft. Tomorrow we get Q2 GDP, Weekly Job Claim numbers, and August pending home sales from the NAR.

In summary, rate markets sold off late this afternoon, amid abundant comments from various Fed members.  I am not expecting significant more short term gains or losses.  If you have floated into the last week's pricing improvement, may be time to take your money off the table and lock up your gains.  Either way, pricing seems content where it is at, and that is certainly something we can all live with.