Mortgage Rates Still Volatile

Mortgage rates are all over the place over the last five days and it is mostly up.  I am expecting to see this volatility for the next several weeks until the mortgage rate market determines the Fed policy and overall economic conditions.

So far, the stock and bond markets opened a little better this morning after another rough day yesterday.  However, this does not change a thing as the equity markets are likely to continue their declines and interest rates likely to edge higher. Next week the FOMC meeting will not increase interest rates but more and more there may be a stronger consensus within the Fed to move in December and markets always anticipate. Equity markets earnings were too high and after the 50 days of literally no movement in both stocks and interest rates this present run is not unusual.

This morning’s Import Prices report was a mix bag.  August data was off, but the Year over Year data is showing a huge increase from July’s report.  Same story with Export Prices.  The Weekly Mortgage Applications for last week jumped higher because of refinances, but Purchases was still strong as well which is encouraging.

I have yet to find the data on Crude Oil as it was supposed to be out earlier.  So far this morning, as I mentioned, the MBSs are positive 18BPS, and the 10yr did get back into the 1.6 range but is back at 1.70% at 10:00AM.

So far even though it is quiet now, I do not expect any big increases in stock indexes or declines in interest rate markets. However, everyone I have read does expect the volatility levels to remain high after two months of little to no volatility in either market. Tomorrow is a huge day for data and I do not usually see so much key data in one session. PPI, retail sales, Philly Fed index, industrial production and capacity utilization, business inventories, Empire State manufacturing index - all tomorrow morning. Friday, another big day with CPI, U. of Michigan consumer sentiment index and its quadruple witching in the markets (expiring contracts and options).  

After over two months of little volatility, it is back.  All of the technical measurements are bearish now in both stocks and bonds. Tomorrow’s heavy calendar and Friday’s quadruple witching will likely keep volatility high. Next Wednesday the FOMC will release its policy statement and Janet Yellen will hold her press conference after the meeting.

Right now these rates are still attractive and I would not wait to lock in now than to hope that we will see something lower.  If you are a risk taker, you certainly can try it, but the big money is to play it safe.