Mortgage Rates See Positive Direction

Even though it was not warranted, rates moved a little bit this morning and stayed there with MBSs moving in positive territory after the first reports this morning.  As small as this may be, it really comes down to the various fees that are charged when quoted interest rates.  Essential point, the rates may seem the same to you, but overall, we are seeing the movement in the right direction.

Neither reports this morning had much market impact. The focus now, as it has been recently, is the declining dollar. Dollar weakness has increased over the last two weeks and does influence investors in stocks and bonds. The dollar index at the beginning of this year was at the 103.21, today at 98.10 down 4.95% this year. Weaker dollar helps exports but does not enthuse foreign investors - as the buck slips investments in dollars lose ground. Given that we think the stability at the long end of the curve is impressive.

In the bigger picture, we've been looking for confirmation that the recent trend toward higher rates, which began in mid-April, had run its course.  While today's improvement doesn't resoundingly offer that confirmation, it's good enough to consider the previous trend defeated for now.

No key economic data tomorrow, but we do get Weekly MBA mortgage applications and Weekly crude oil inventories. Crude has increased about $3.00 the last two weeks after declining $5.00 the previous two weeks.

Increasing talk and articles that the stock market is very over-valued and way overdue for a correction. I wonder where you have seen that report….  Oh yea, I have been talking about this for nearly two months, but the indexes continue to climb currently led by the NASDAQ that makes a new high almost every day. Not going to argue against investors continuing to buy and unwilling to sell - it goes against market performance, but a lot of us do expect a rather deep correction. “When” is the unknown, I certainly do not want to speculate other than to say that it will take some form of market shock to trigger it. The importance is that when (if) it occurs money will flow into the 10yr note and push mortgage rates down from whatever levels exist then.  

It is tempting to float but the 10yr is still unable to break through resistance at 2.32%/2.30%.

In summary, another sideways day in the range.  No change to my lock float stance, recommending float if we’re under 2.42 in the hope of revisiting 2.1.  On sideways days, I like to keep in mind that floating can have two benefits.  Both time and market improvements can help improve rates for borrowers.  A 45-day lock can be more attractive than a 60-day lock in most instances.