Mortgage Rates End 3-Day Winning Streak
Mortgage rates moved sharply higher today, erasing more than half of the improvement seen in the relief rally of the past 3 days. That rally was something of a paradox in that stronger employment data (as seen on Friday) typically pushes rates higher.
Rates had been exceptionally weak through the entire month of November and into early December, leaving them in an overly defensive position ahead of a jobs report that wasn’t that much better than expected. In such cases where market trading levels are somewhat offsides, it’s not uncommon to see a “relief rally” lasting anywhere from a few hours to a few days.
The absence of economic data and events during the first three days of the week allowed the positivity to continue unchecked, but the longer a relief rally continues, the more likely it is to bounce. With some help from headlines and an eye toward the week’s first significant piece of economic data tomorrow morning, today became the day for the bounce.
The headlines in question concern the promise of a budget deal from the House. This is a domino in the mortgage rate equation because the Federal Reserve cites “Fiscal Drag” (uncertainty and lack of legislation surrounding the budget, sequester cuts, and debt ceiling) as a reason for delaying a reduction in bond buying.
That bond buying is a positive factor for mortgage rates, and although markets have mostly come to terms with the fact that it will be curtailed in coming months, if that were to happen at next week’s Fed meeting as opposed to some time in early 2014, rates would likely rise.
Had the budget deal already been passed, rates may have risen more abruptly. From 4.5 percent yesterday, rates are back up to 4.625 percent in many cases for ideal, conforming 30yr Fixed scenarios (best-execution).
The biggest event on the horizon is next Wednesday’s FOMC Announcement. This will almost certainly set the tone through the end of the year. The pre-game warm-up for that main event begins with tomorrow’s Retail Sales report–at least it could. If the numbers are much stronger than expected, rates could continue higher, but they could stabilize if the report is significantly weaker.
Posted on December 12, 2013, in Uncategorized and tagged Best execution, Economic data, Federal Reserve System, Fiscal drag, Friday, House, Mortgage loan, report. Bookmark the permalink. Leave a comment.