Mortgage rates had another good day today as I was impressed how well the bond and MBS markets held up today with the equity market improving and the September employment report on Friday. I would have expected some pullback but there was not much until towards the end of the day today which makes me wonder what tomorrow will bring.

The September Chicago purchasing managers' report this morning fell in line with other regional Fed reports. The other regional indexes are also in deep retreat (except Dallas). The decline likely supported the bond market today, showing more US economic slowing. The drop in the Barometer to below 50 was its fifth time in contraction this year and comes amid downgrades to global economic growth and intense volatility in financial markets which have slowed activity in some industries. Manufacturing is not nearly as big a part of the U.S. economy as it once was, and all indications are that services sectors are still humming along at a robust clip. Service industry jobs cannot hold the economy on its shoulders, low wages and discretionary spending can dry up quickly.

Tomorrow markets get the national ISM manufacturing index. If the index comes at under 50 look for a big sell-off in stock indexes and improvements in the interest rate markets. If it were not for the employment report tomorrow any selling in stocks or buying in bonds would be stronger. If the index increases look for treasuries and MBSs to lose ground (pricing).

Also tomorrow, weekly claims, but are not as important now than earlier in the year. Claims have been tied to 270K levels for over a month now. August construction spending and September Auto Sales will be out as well.

The Fed is not going to increase rates this year. Global growth, or the lack of it, is pushing the US closer to more weakness. Janet Yellen has set the table, as she continues to say, it is all about incoming data and that is not good.

In summary, I continue to expect interest rates will decline more from current levels. All of the work technically remains bullish, but with the decline the ride will be rocky. There will be another big round of re-finances in Q4 this year. That is my take now and we will not deviate until the markets tell us to do so. Right now the bond and mortgage markets are technically sound - MBSs a little less as money is going to treasuries. As long as that continues mortgage rates will follow, albeit at a less aggressive moves. Friday employment is huge as always, that China's markets are closed next week may open the door for stocks to improve, however the path is lower for equities.