Interesting dichotomy here at the close... In one way, nothing much has changed since the last post. In fact, nothing at all... But in another way, measuring what's "changed" and what hasn't all depends on whether we're talking about the tenor of the day, week, and beyond, or if we're talking simply about price movements. The price movements (down about 6 ticks to end a tick into negative territory) may SEEM significant, and if they had been preceded by an extremely flat market, probably would be...
But considering the range boundaries discussed earlier (earlier today, this week, last month), it really and truly is, just more of the same:
None of that late day weakness occurred with any major volume or reason behind it either. So given that the post 3pm trade on a Friday tends to be of little value in gauging future market behavior, and even then, that stopped right on the previous range, really and truly, nothing much happened since the last post.
If you missed the last post, I seem to remember making some words bigger than others and even using capitalization in places! Take a read if you missed it, but here are some highlights:
the broader view of the week brings the 800lb gorilla into focus:
EVEN THE OSTENSIBLY HORRIBLE NFP PRINT WAS NOT ENOUGH OF AN IMPACT TO NUDGE BONDS OUT OF THEIR NEW ORBIT AROUND "PLANET UGLY."
What's ugly? How about a range between 3.8 and 3.84 in tsy's (outer limits at 3.75 and just over 3.85) on the heels of sub 3.56 ranges for many previous weeks?
Range-bound and waiting for guidance? I almost hate to say it, but it's the best way to describe where we are.
AND YES! NFP SHOULD have provided that guidance, but AT LEAST FOR NOW, the market is telling us it has not... And it wants more... It always wants more.
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And good stuff in the RateWatch section, a less "formatted" wrap of the day:
HOLD STEADY OR MOVE HIGHER: Rates could fall briefly only to rebound back to current levels or even higher. Either way, mortgage rates would bounce around a new, higher costing range. This would occur because economic perceptions were optimistic. This is a favorite for early 2010. After several months of choppy growth, the market is beginning to believe "the worst really has been avoided". If economic activity continues to show signs of improvement (even if its scattered), the bond market will take the "better than expected" side of the trade and mortgage rates would creep into the 5's and maybe even test the 5.50 level (at best). This is if the OPTIMISTIC perception grabs hold of headlines. This category also includes an outlook with no brief recovery.
55% chance in short run. 75% in Q1 2010
Based on the mortgage market's reaction to today's data...the above outlook is beginning to look more accurate.It seems like the hints provided by the market in December may have actually reflected the market's true bias towards higher rates.
While one day of trading, especially a Friday, is not enough to confirm that bias, we have to continue to base decisions on the current message being sent by the marketplace, anything else would be guessing. With that in mind, floating is very risky, I would still be locking my loans.
Until the market corrects and confirms a mortgage rates recovery, I will likely continue to advise locking...although there may be days where I recommend floating overnight, but nothing long term until the rates market shows clear signs of a correction.
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Coming up on Monday:
- Lockhart speaks at 1240
- 10yr TIPS, not normally a major MBS mover, but we'll give a line item to anything with the "I-Word" as a component of its acronym
MBS Market Alerts
