Mortgage Rates Facing Some Volatility Today

Mortgage rates are moving higher so far today as we are seeing some volatility in the bond and mortgage markets increasing. Yesterday the 10yr note and across the entire yield curve interest rates declined to 2.18% with MBS pricing following suit.  Today it is a bit different as we are giving back those gains at 11:00AM as the 10yr is at 2.21% and MBS pricing off by 21BPS.  Just a little pullback as there was no news to drive this today.

This weekend the French elections are weighing on markets - the first of two with the run-off happening on May 7th. Two of the candidates are the focus, both saying they would change the relationship of France with the EU.  Current markets are betting for that the two extremist will not win, but remember, we know how badly the UK Brexit vote turned out for those betting on a no vote, and no one believed Trump would win. The record of accomplishment for forecasting elections is not good.  I guess we will all wait and see what happens.

Weekly Mortgage Applications dropped -1.8% which was led by a significant drop in purchase applications (-3.0%) refinance applications were flat at 0.2%.  Today, we will get the Fed’s Beige Book. This is prepared so that all the committee members can get a good understanding of how the 12 districts are doing and are to be used in their discussions for their May 2-3 policy meeting. The market has 0% probability of any rate hike at this session (mostly because it is not a meeting that has a live press conference attached to it) and less than a 50% chance of a rate hike at their June meeting.

Somewhat of a relaxing on the North Korean issue this morning as the WSJ reported that the US “armada” that was on its way toward North Korea really has not occurred. The aircraft carrier USS Carl Vinson was thousands of miles away on exercises off the northwest coast of Australia. It is not expected to get to Korean Peninsula until sometime next week. The Trump administration was miss-leading with its tough talk and apparently hid the whereabouts of the carrier. Takes a little of the fear factor off the table for today.

While mortgage rates are likely to push slightly higher today, I do not expect anything dramatic unless an unforeseen geopolitical event occurs.