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Bart Castelli

Rates Caught a Break Today

Tuesday, April 14, 2015 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 - Message

March retail sales weaker than thought this morning, although up 0.9% markets were expecting +1.1%. Normally that kind of miss would not have any impact on markets but with three previous months of negative sales, that sales were soft sent the bond and mortgage markets into short covering. The 10yr yield dropped 7BPS this morning to 1.86%, as we noted this morning that level is a strong resistance level.

The 10yr could not break 1.86% on the sixth attempt in the last two weeks. Once it failed the rate jumped back to 1.90% and sent MBS prices from +32 to +12 bps. The week should be increasingly more volatile withy the events and data through the end of the week. As long as the 10yr is in its16BPS yield range we have to define the market as neutral with a wider bearish outlook. Even though I am fractionally positive as long as the market stays within its present range, I am focusing more attention on the treasury markets because all other rates stem from treasuries, however the same chart pattern has formed in the MBS chart that the 10yr has.

In summary, rates caught a break today, and loan pricing improved across the board. Nice rally today in the bond and MBS market following weaker than expected Retail Sales data. Currently, the benchmark 10 year note has very solid resistance just below around 1.86% which it has been unable to break over the last couple months. So we are currently at the bottom of our range which is a lock indicator. I would recommend locking all loans closing within 30 days. Longer than that may not be as prudent as we have seen too much money left on the table.

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