Yellen ain’t Yelling…

Quite the contrary, she commented today that nothing would lead the markets to believe there would be a June rate hike.  MBS have responded nicely, but are bumping up against resistance, so you should see some gains this afternoon, but it may be wise to lock into those.  The 10 year treasury has also dropped below 2.02, it would be great to see it close below that level.  Lots of data yet to come this week that could be market moving.

I’m starting the day very cautiously floating; a lot of technical damage has been done in both the Mortgage Backed Security and Treasury markets.  Several very key support levels have been blown through.  We are sitting on the next level of support at the 100 Day Moving Average.  You can see the next support level below the 100 DMA is over 100 basis points below current level.  There is a saying in the financial world, “don’t catch a falling knife.”  A falling knife can rebound quickly, but also further even faster should sentiment and momentum continue.  The Producer Price Index was tame this morning and housing starts missed by a little, this will all take a back seat to the technical trading picture.  I have been in a locking bias for several weeks and although rates are off the historic lows they are still absolutely fantastic.

A pivotal day – I’m showing a chart of the 10 year treasury instead of the Mortgage Backed Securities, MBS are what drive our rates, but they have a solid correlation to the treasuries, the 10 year in particular.  All of the curved lines you see are Daily Moving Averages, the most important today is the 50 DMA, the black line.  You can see it intersects with the 10 year treasury at 2.02.  There is a 10 year auction today and 2.02 is pivotal, the 10 year is currently at 2.00.  You can see that past week rates have been on the climb.  If the auction results are poor, rates have a lot of move to run up as the 100 DMA is the next support line and 2.22 are far above current levels.  If the yields rise then it would take mortgage rates up with them.  Rates will still be fantastic, they just won’t be quite as low.  Conversely as you see over the last 6 months the 50 DMA has been rarely traded above it, so a good auction could see a reversal in the recent rate climb.  If you are happy where things are it couldn’t hurt to lock, but if you can stomach a little volatility you could be handsomely rewarded.

The jobs numbers SOAR!

Mortgage rates are up this am as the recent trend continues.  It is imperative to take advantage of these low rates now.  Mortgage Backed Securities and thus mortgage rates are at pivotal cross roads, you can see on the chart that they are sitting at support, but as I am typing this they have already dropped below.  The catalyst behind today’s move was an amazing jobs numbers which only beat the estimate by 27,000, but the previous 2 months were revised a combined 147,000 higher.