Mortgage Rates Head Lower - 10yr at 2.32%

Mortgage rates continued to head lower today as the 10yr continues to slide lower – even if it is still within that narrow range we keep talking about since the beginning of the year.  Since the Fed increased the FF rate on March 15, the 10yr has dropped from 2.50% to where it closed today at 2.32%. 

Volatility in the equity markets today, as at one point this afternoon, the DJIA was down 145 points but as is usual recently the final hour usually improves as day traders close out. Still no important correction or retracement, the worst has been that the indexes have slowed their ascents.  

Politics are alive in Washington as the Senate Judiciary Committee will send Supreme Court nominee Neil Gorsuch to the full Senate where Dems promise to filibuster the nomination. Meantime Republicans threaten to use the “nuclear option” to override the filibuster. If it goes that route there will no longer be any filibuster that can stop any political nominations for any key jobs.  Presently it is only Supreme Court nominees that can be filibustered after the nuclear option was used by Democrats during the Obama Administration.

This morning we had a few nice economic data points that would generally be negative towards pricing, but was not the case. There is lots of head scratching over why interest rates are sliding instead of increasing with the Fed and now the ECB expected to continue to remove stimulus. Tomorrow the 10yr will test once again its strong resistance at 2.32%.  Big money, smart money, has moved some investments out of equities and into safe treasuries, or just buying insurance for the anticipated correction that has yet to fully bloom. If the 10yr moves below 2.32% and were to close below it our projections will take the 10yr down to 2.25% to 2.20%. If it holds there, most do not expect a huge increase – just another large range trading. Pay close attention to the 10yr chart in tomorrow morning’s open as that will tell the tale of what to expect.

In summary, bonds posted broad gains today, as both treasury yields and MBS prices reached levels last seen in late February.  While the future is hardly a given, this rally feels like it has some legs at the moment.  While those closing within 15 days likely want to grab these gains, floaters with some risk tolerance and time may see further improvements. If floating, have a "stop/loss" in place to ensure you are protected if market momentum reverses.