13 Oct No rush to lock, but keep a close eye
In what we are hoping is a signal of the end of the downward spiral mortgage bonds have been on, they are up slightly today. Further, the 10 Year Treasury Note yield has softened and is now testing a significant floor of support provided by the 200 day moving average. If we see the 10 Year Note yield close beneath the 200 DMA, that would provide some hope that rates can hold at current levels for a bit longer. Historically, a break above or beneath this critical level signifies a longer term change in the direction of mortgage rates. When the yield broke above this level, it signaled that rates would continue to move higher. However, if it is able to fight its way back beneath, that could signal continued lower rates for the time being.
The US stock market has been experiencing significant volatility the past couple of weeks that has led to falling prices the past couple of trading days. The move lower is heavily influenced by concerns of an imminent Fed rate hike as well as weaker than anticipated earnings reports. This morning, stocks broke beneath their 100 DMA. This significant move lower puts stocks in a position where the next solid moving average is the 200 DMA, which is a long drop from current levels. It is widely believed that the US stock market will experience a rough patch when the Fed moves interest rates higher. With that likely happening in December, there is cause for concern in the market.
There is no immediate reason to lock at the moment. Bonds have experienced a significant decline the past couple of weeks which has made specific mortgage interest rates more expensive to achieve. There is a strong likelihood that the 10 YTN yield will bounce off the floor of support and move higher. If you aren’t able to watch the market closely, locking remains the safe play.