Mortgage Rates Move Significantly Today

Mortgage rates finally moved significantly lower today, as we finally saw some solid direction, even if it has been only a few days in a row.  While I would love to tell you that this is a sign of a big shift back in a friendly direction, the gains are largely a result of the year-end bond trading environment.  It's not the same bond market that's normally pulling the levers behind the scenes.  Volume is lower and participants are in shorter supply.  Trading considerations differ from other times of the year.  It can all add up to unexpectedly quick moves and the appearance of new momentum that is subsequently erased in the new year.  That's not to say a big bounce toward higher rates is guaranteed next week, but it's at least an equal possibility.  Whatever the case, the past 2 days of gains can't be viewed as the sign of a new trend.

Took a while but the Obama Administration finally responded to Russian hacking and the belief Russia tilted the election.  This afternoon Pres. Obama announced sweeping new sanctions against Russia in retaliation for cyber-attacks against the Democratic National Committee and the emails of a key Hillary Clinton adviser that it claims were orchestrated by the Kremlin. Obama signed an executive order to issue sanctions against foreign governments that attempt to interfere in US elections, issuing specific measures against four officials of Russia’s military intelligence unit and two hackers, who it alleged had orchestrated the cyberattacks. The State Dept. expelled 35 Russian intelligence operatives stationed in the Russian Embassy in Washington and the Russian Consulate in San Francisco for activity that the US said was “inconsistent with their diplomatic status”.

The Obama administration also announcing a series of retaliatory measures against Russia for hacking into U.S. political institutions and individuals. Access to two compounds, one in Washington and the other in Maryland which are used by Russian officials for intelligence gathering, will be denied to all Russian officials tomorrow. The U.S. declined to name the Russian diplomats who would be affected.

There was absolutely no response to the Russian announcement. The 10yr and MBS prices did not move. Stocks did not respond. Markets know in three weeks Trump will be in charge - he has leaned toward a friendlier relation with Russia, at least for now. House majority leader Paul Ryan called the sanctions “overdue”.

Treasury sold $28B of 7yr notes today; not quite as good as the 5yr yesterday but still a good auction.  Tomorrow the bond market will close at 2:00 pm, the other markets set to go all day but volume will be thin. Most closed down today and will not re-open until Tuesday. All markets are closed on Monday. The only data left this year - the December Chicago purchasing mgrs. index at 8:45AM. 

In summary, I would love to float into this rally and hope it continues, but I cannot base my strategy on hope. We have had too many violent selloffs following mini rallies like this in the last 2 months. Until we have a substantial follow through of this current move lower in rates (which has occurred with exceptionally light volume) I am locking in at the earliest opportunity per loan.