Mortgage Rates Quiet

Mortgage rates moved sideways to slightly lower for the 2nd day in a row, after hitting the highest levels in 5 months last week on Thursday.  While the positive progress is better than a sharp stick in the eye, it nonetheless leaves us right in line with highs for all practical purposes. 

Starting off the week with the last day of the month, it was relatively quiet all day, with the 10yr note down to 1.83% on lower oil prices. I did state a week ago and the week before that oil prices were not likely to move higher as many thought with OPEC sounding like it would cut production. Since the OPEC gathering three weeks ago members have squirmed out of any cuts, and the Saudis for the first-time borrowed money selling a $90B bond. Iraq wants out and Iran wants out of any deal. There is more oil in the US than any other place and more oil in the world than global markets can use. All about money, the idea of cutting production is an anathema.

Busy this week with a lot of key data, as the data today was about as expected and no changes to the pricing.  Tomorrow we have the ISM manufacturing index, September construction spending, October auto and truck sales, and of course the FOMC meeting start tomorrow but nothing until Wednesday afternoon.  

The Bank of England will be meeting on Thursday and all eyes will be on Governor Mark Carney. There was conflicting reports on how long Mr. Carney plans on staying at the central bank. He is the primary stabilizing force in the current environment so his future at the bank will be in focus Thursday and a key driving factor - Carney said he would stay on at the BoE until June 2019 to help navigate monetary policy through the Brexit process.

Although quiet, I remind everyone that the technical models remain bearish now - 1.80% near term resistance. There is margin for improvement though and remain negative - the 10yr will have to move below 1.74% to actually turn the data bullish. Until that happens trading in the long side of the mortgage markets.

Clinton overall is still expected to win, but the FBI decision to look at more e-mails has reduced the poles’ margins of victory substantially. Markets still hold a Clinton win but the race has narrowed and any poles now should be taken with grins of salt. One week from tomorrow we will have the decision. On Wednesday, the FOMC policy statement, I expect another supportive statement about the economic condition and members leaning more to a rate increase in December.

In summary, this week promises chills, thrills, and perhaps a few scares, and not just because of Halloween.  Friday marks the release of October's NFP jobs report, and between that, election drama, and a resoundingly bearish bond market, it's vital to NOT take pricing for granted.  My pipeline is locked, except for some files closing 45+ days out.  Float with great caution, or (better yet) do not float at all.