Thursday, April 14, 2016 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 -
Mortgage rates change every day, and unfortunately, they do not move in the direction we want them to move. Today, they moved higher for the 2nd time this week, albeit just slightly. I keep track of rates every day, based on what the banks are offering and a few others in my markets that help me hone in on what the average loan officer is quoting in the market.
Even though it was quiet today, and that there was very little movement in stocks or the bond and mortgage markets, did see an increase in the rates today. This morning March CPI was slightly lower than expectations but generally did not show much movement. Markets are looking ahead to this weekend with the IMF/World Banks meeting in Washington. Both organizations are fretting the world economic malaise, more negative than our Fed. Our Fed, like the ECB and BofJ and other central banks, are not willing to speak negatively; always the sun is shining down the road.
This afternoon another strong treasury auction. Yesterday's 10yr was very well bid and today the 30yr also saw demand that was the best since Sept 2015. Although the three treasury auctions were very well bid this week the interest rates have not declined. Yesterday's 10yr auction yield at 1.765% and today, it closed at 1.79%.
Tomorrow's data comes out with the April NY Empire manufacturing index, March industrial production, and March factory use. Also, the U. of Michigan mid-month consumer sentiment index will be out later
This is earnings season, it began on Monday. So far large banks have been better than forecasts and that sending the stock indexes higher yesterday. BofA and JPMorgan Chase beat expectations, not by direct increasing earnings but by cutting pay, closing branches and firing employees. What I am hearing is that investors are encouraged about it. Firing employees, cutting pay and closing offices should be a warning sign but these days anything that beats estimates regardless of how is seen as a plus.
All of the work now is neutral, not bearish yet but techs have lost a lot of momentum this week after the big declines the previous three weeks (rates). MBS prices this week down 20 basis points, the yield on the 10yr last Friday 1.78%, now 1.79%. Marking time.
In summary, mortgage bonds continued to trudge along today, and were down slightly throughout the afternoon despite a strong 30yr treasury auction. The rally looks tired, the question is whether it will take a breather and come charging back, or be trampled by lurking bond bears. Time will tell, but for now, all my loans within 30 days of closing are locked. Floating borrowers whose closing is approaching need a lock strategy. If you have not already defined that with yourself, it is time to do so.
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