Monday, June 20, 2016 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 -
Mortgage rates continued to climb today, and towards the end of the day, at a faster pace than we have seen in a long time. The question now is "Will they, or want they?" This is what in now dominating US and global markets. Over the weekend a new poll indicating the vote would be to stay but the polls released in the past two weeks have been like a shotgun pattern, all over the target. Today Europe's markets rallied strongly, it carried over to the US with the DJIA opening +210 this morning and the other indexes up big. The rate markets did what they would be expected to do with the momentary change in sentiment from do not know to likely stay.
Now the belief is that they will stay, but in the meantime we are not expecting any significant change in the rate markets or the stock markets. Technically the 10yr has good support at 1.70%. If on the chance the voters actually vote to depart it will throw all US and global markets into chaos.
This afternoon Treasury sold $26B of 2yr notes. The auction was not the kind of buying two weeks ago and a month ago. Tomorrow $34B of 5yr notes on sale at Noon. There will be no data again tomorrow but Janet Yellen will be at the Senate Banking Committee for her semi-annual required testimony. Not much she will say about the economic and inflation front since she had her press conference last Wednesday. There should be a lot of questions and discussion over the UK vote.
Bottom line: the trend toward lower rates has shifted as Brexit-related risks peaked. It is safer to assume rates will go higher until we see a definitive shift in this new trend. With the British referendum vote happening on Thursday, volatility is all but guaranteed.
In summary, world economic markets appear to be calming down (for the moment) after last week's Brexit panic. Whether Britain leaves the EU or not, rates are creeping up. The rise is completely logical, last Thursday's drop put us significantly under well-established prior resistance levels. For now, I am back to locking earlier in the process, unless a well-informed borrower wants to roll the dice.
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