Mortgage Rates Trends Continues to be Not Our Friend

Mortgage rates have been moving upward just a tad - basically not helping those who want to see some sort of movement downward, especially to those who are still floating.  Rates have not necessarily moved up, it just that they have not moved down, except for only three out of the last fifteen days. 

Again, we did not see much movement today even though it was a bit choppy, the 10yr did close at 2.40%.  While this sort of losing streak sounds fairly unpleasant, the size of the movement has been far from threatening. 

Treasury sold $24B of 3yr notes, which was generally in line with last month’s 3yr and the averages over the last 12 months. This morning March wholesale inventories increased 0.2% as expected. All the increase was in autos. Sales in the wholesale sector were unchanged in the month though the mismatch with the inventory build does not lift the stock-to-sales ratio which holds at a healthy 1.28. These results will not upset expectations for an incremental rise in Friday's business inventories report.

The April NFIB small business optimism index out this morning was the sixth straight month of historically high optimism, a streak not seen since 1983, according to the NFIB. Five of the components of the index rose, three declined and two were unchanged. The gainers were led by current job openings.

There was rumors out this afternoon that North Korea conducted another nuclear test. No hard news yet but the talk pushed stocks down and added some support in the bond markets.

Tomorrow weekly MBA mortgage applications, April import and export prices, and at Noon, Treasury will auction $23b of a new 10yr note, and the demand is important. Weak demand will push rates higher. At 1:00 tomorrow Treasury will report the April monthly deficit.

In summary, the trend continues to not be our friend.  Bond markets' slow but steady declines continued today, and mortgage pricing worsened again.  We are now at the highest treasury yields since the end of March, and lowest MBS prices in a month (lower prices mean higher rates).  As I said yesterday, bond markets have scant reason to improve if stocks soar and there's no catastrophic geopolitical strife looming.  There's ample logic for locking, and virtually none for floating.  Until that changes, I would be locking sooner rather than later.