Resistance

Interest rates on rate sheets this morning, are awesome... 4.25% at an up front cost of .469, and an APR of 4.554% is what you're looking at for a 30 year fixed conforming (417,000 or below) right now. How about 3.75%, at an up front cost of .257, and an APR of 4.203% on a 15 year fixed conforming. These rates are as good as I have seen.

Why are rates better despite the market not showing gains. Lenders have finally stopped hedging against the market. This is a lock opportunity. The signs are clear. Excellent rates, current resistance in mortgage backed securities - there is potential for a sell off. Despite this potential we have to recognize what is keeping our market at these all time highs.

Point in fact the 10 year treasury yield is incredibly low right now, currently 3.15%. A low yield currently looks sustainable considering the pressure in Europe... things appear to be getting worse, Hungary discussing the potential need for a bailout for example.

And of course you have the oil leak in the gulf. This is substantially worse than people are reporting and investors recognize this fact and are playing it safe - safe being long term markets - mortgage backed securities and treasury yields.

Let's talk about the gulf oil leak for a quick minute. Yesterday it was reported that 463,000 gallons of oil were captured, and the cap was still leaking substantially. They told us earlier that by cutting the pipe about 20% more oil would be spilling into the gulf. until they got the new cap on, and I think it is fair to assume BP is not sucking the oil out faster with this cap on. Why am I bringing up these numbers... take 20% out of 463,000 and we're left with 370,400 barrels. This is the amount (offset of course by what they are still not capturing) that had been spilling into the gulf each day. Multiply this by 46 days, and we get an idea of how much oil has actually entered the gulf about 17,038,400 gallons of crude (and counting). Is that a lot? To put in perspective the Exxon Valdez spill dumped an estimated 10,800,000 gallons of crude.

This spill is almost twice as big as Exxon and it is still leaking. Investors recognize this, and are playing it safe, which means long term markets with consistent and reliable returns.

All things considered, I am expecting a retraction sometime soon. Although I think we will find support quickly and could bounce off that support rather quickly. Whenever you are testing historic highs as we are right now you can expect reprices from lenders with small sell offs... locking is a wise decision, but I can understand floating into shorter lock periods, just be careful and work quickly. The five day suggests a rising trend, but as you can see whenever your crossing the historic highs some investors are going to take a little profit. Wouldn't you?