Rates Inch Higher

Yesterday's afternoon rally in the stock market, has lead to slightly higher interest rates this morning as the mortgage backed securities market lost a little ground and is trading a little lower today. The 10 year treasury yield has also increased, currently trading at 3.24.

All things considered these losses are acceptable. All gravy with no potatoes leads to a stomach ache. It is important to have see the market tested, and minor sell offs are healthy. Minor regressions such as this one demonstrate to investors current support levels. During minor sell offs when it becomes apparent that there is support at the current levels, often times we see investors begin to buy. Up and down, up and down... it's a cycle.

Moving forward we do have a 5 year treasury auction set for today. Yesterday's two year was received well, but could have been better. This longer term instrument has more bearing on our market, so it will be interesting to see how it is received, particularly by overseas indirect bidders. If you are looking to lock an interest rate soon, I recommend paying close attention to this auction. Should we see a strong indirect bid the mortgage backed securities market should benefit. If it is not received well, I am anticipating this sell off will continue - the degree and speed of which would be determined by the auction as well as any rally we may see in the stock market.