Mortgage Rates - Can You Say Volatility?

Mortgage rates started the day a little higher than they were on Friday, but it was not unusual to see what transpired by mid-morning when I first wrote my report. Volatility continues to run much higher than normal, with lots of intraday reprices (banks changing rates in the middle of the business day) over the past 2 weeks, and generally big changes from day to day.  Bond markets (which underlie mortgage rate movement) began the day in much weaker territory, but managed to make some huge improvements heading into the afternoon. 

The 10yr found a little near term support today at 2.45%, tested now three times including today and it held. MBSs got a run early on and then got better before ending the day with a slight negative.   The dollar got tagged today too and that may support the 10yr if it continues but the wider view for the 10yr, MBSs and the dollar remains intact.

What fueled the run was a very solid Nov ISM services sector index this morning, beating expectations by a big margin.  The stock market liked it, as the DJIA in early activity ran up about 100 points but did retreat this afternoon.

The turn in the bond and mortgage markets such as it was, driven by crude oil.  It traded higher this morning but sellers emerged this afternoon to take crude lower on the session. The stock market technically over-bought and the rate markets oversold but so far neither course has had enough momentum to achieve any significance.

Italy’s elections yesterday throwing another possible wrench into the EU. Just worries now, nothing concrete but the crack in the Brexit dam may be getting larger. Greece still has not been able to pay its debts with the stringent EU, IMF and ECB requirements - now Italy.

In summary, another volatile Monday after digesting the weekend news of the Italian vote and various speakers. The 10yr range appears to be settling in post-Election between 2.28-2.50. Key points are at 2.35 and 2.42. Base your lock/float decisions on where we are until something moves the needle outside of these ranges. More info to come in the next few weeks with ECB and the Fed Reserve meeting. If you get close to the 2.28 or 2.35 range and are closing soon, locking may make sense. Always remember, Pigs Get Fat, Hogs Get Slaughtered!