Mortgage Bonds Improved With No Change to Rates

Mortgage rates stayed close to the highest levels in more than 2 years today, even though underlying bond markets left plenty of room for improvement.  Typically, when bond markets improve as much as they did today, rates would be noticeably lower.  Unfortunately, with all the volatility in the markets these days, banks are reluctant on passing these improvements to the consumer.

There was not much news today.  Janet Yellen spoke at the University of Baltimore this afternoon, the topic was education and the need for more of it.  No discussion or comments from her on monetary policy, she said it all last week at the FOMC meeting and her press conference. She said, wage growth is picking up “and weekly earnings for younger workers have made strong gains over the past couple of years.”

Treasuries and mortgage prices did improve today, but mostly just adjusting to the long weekend ahead. The bond market will close early on Friday and all US markets will be closed next Monday for the Christmas observance. Tomorrow also no scheduled news to consider. Tomorrow the Bank of Japan will conclude its first policy meeting since Donald Trump’s election victory last month reset the global market landscape, triggering a surge in bond yields and a slide in the yen.

With no serious market news today was a sleeper although MBS prices and the bellwether 10yr note did improve. I have nothing to add or to take up your time. Between now and the end of the year markets have a tendency to exaggerate any news. Nothing tomorrow but Wednesday through the end of the week key economic reports, most are November reads.

In summary, we have seen this happen before - rates rise abruptly, and then give the impression that they have topped out.  Hope increases for rates to fall just as the next abrupt move higher begins!   Until this cycle is broken (and it could be on hold until the new year), I would not expect any major reversal of fortune here.  Play it safe, new loans should lock at application and give yourself extra time due to the holiday lag.  I would rather be late to the party versus showing up on time to find out it is cancelled.  Barring an unforeseen extraordinary geopolitical or global economic event we most likely will not see a reversal of the current trend in higher interest rates.