Mortgage Rates Showing Signs of Improvement This Morning

Mortgage rates were trending slightly higher this morning, but as of 11:00AM, have seen some improvement since pricing has come out from the banks.  Last week the MBS market and the 10yr note were hurt just a bit, but nothing to change the rates from the previous week.  However, every day seemed like a new adventure as we saw a lot of volatility in our markets.

Italy held its anticipated elections yesterday.  It did not go well for the current prime minister Matteo Renzi, as he is expected to resign. Mr. Renzi suffered a decisive rebuke on Sunday, with 59% of voters rejecting a constitutional change meant to overhaul Italy’s legislature to make lawmaking easier and encourage the creation of more stable governments. European leaders not happy with the result - the election may be another problem within the EU, following Briton and increasingly more countries thinking about the future. No effect in the currency markets though, the dollar weaker against the euro currency this morning. European sovereign yields are mostly higher this morning after the Italian constitutional reform referendum suffered a 59.1% to 40.9% defeat. Italian bank stocks are down roughly 7% this morning.

On Thursday, we will be getting the ECB’s latest interest rate decision and policy statement followed up with a live press conference with ECB President Mario Draghi. Of interest to bond traders is any change or extension in their bond buying program. This program is set to expire in March. The ECB had been letting the market think (through leaks from policy makers) that they were considering "tapering" (lowering the monthly amount of bond purchases) over the next couple of months until the program ended or extending it past March and tapering a little each month. But with the Italian vote this weekend, will they extend it completely and/or increase it?

As I mentioned last week, we have a very light week for economic data. The most important data point will be today’s ISM Non-Manufacturing reading. The reading came in with a very solid reading and is negative for mortgage rates.

Oil Prices are on the move again with Brent Crude briefly breaking above $55 for the first time in 16 months and WTI Oil is above $52. IF, WTI can break above $55, then that will be very negative for mortgage rates. IF WTI can break back below $50, then that is very positive for mortgage rates.

We get our last dose of Fed speak today as they enter their "black out" period prior to next week's Fed meeting.  New York Fed President William Dudley said it is premature for the central bank to consider adjusting its rate-hike plan following Donald Trump's U.S. presidential win and that "assuming the economy stays on this trajectory, I would favor making monetary policy somewhat less accommodative over time by gradually pushing up the level of short-term interest rates."  Chicago Fed President Charles Evans said that while the U.S. labor market is "kind of tight," wage growth is slow and inflation is still too low.  We will also hear from St. Louis Fed President James Bullard this afternoon.

This week we have a very light week for economic data that's likely to move mortgage rates. However, ever since Trump won the election we have seen mortgage rates continue to head higher in a very choppy market.  Right now, I am locking loans within 30 days of closing and riding the storm.  Of course, these rates are still attractive and should not go unnoticed if you want to take it and rest easy.