Mortgage Rates Much Higher Today

Mortgage rates were much higher today.  The brake into higher yields started yesterday with the comments from Mario Draghi and repeated this morning. Draghi let it out that he is increasingly leaning toward understanding that lowering interest rates further and increasing QE buying is not working and reading between the lines he may be giving up on his rock-solid plan. Whether he follows through is not the issue - the issue is US interest rates are going to increase and the Fed will increase the FF rate at its December meeting, at least that is the present thinking that is gaining momentum. Add a better Q3 GDP report from the UK with Draghi’s remarks it was enough to push rates out of their malaise.

The models and most other long-standing technical studies turned bearish on 10/4 and has remained so even though until today there had been little movement in the rate markets. Mortgage rates were generally unchanged since the beginning of October. Like shaking up a bottle of Coke then opening it - rates spiked today as the balance was broken. The next question is, how high will rates increase and how long will it take before there is another pause. There will be a pause when the 10yr hits 1.90% especially if it gets there in the next few sessions. In the meantime, rate market volatility exploded today and will continue to be at high levels as uncertainty over the election results and the Fed expand.

Tomorrow Q3 advance GDP will be reported, the first of three consecutive month revisions. Economists expect Q3 initial report tomorrow at +2.5% while the Atlanta Fed GDPNow is at +2.1% as of this morning. The GDPNow is updated on each key economic report, the next update is scheduled on Oct 31st after Sept personal income and spending are reported.

In summary, I suggest locking in interest rates at this time.  Rough sell off today.   The trend is not our friend has been the recent theme and that continues today. We do have some important data tomorrow, but I doubt it will be enough to change the trend.