Slow Start for Mortgage Rates This Week

Whenever we see a strong sell off on the equities markets on a Friday I worry about Monday's open in the securities markets. Today is a perfect example of why. After the stock market took a nasty tumble last Friday, I thought we may see a rebound today, which as it turns out was in fact correct. This rebound however spits in the face of our mortgage backed securities market which, is losing ground in response to the rally we're seeing in the stock market.

We're still in comfortable territory considering the gains we have experienced in the last couple of weeks, and our being down only 3 ticks today after losing 10 ticks on Friday is not a sign the that the atmosphere is on fire, and we'll be out of oxygen by days end. It does suggest that we are at a point of resistance, and will need to break through if rates are going to get any lower. This means the ten year yield needs to drop below 2.10 and eventually 2.00 if we are going to see mortgage rates continue to fall.

In addition we need the Fed to make a statement that work sin our favor later this week. What we do not want to hear is any sort of talk suggesting they are gearing up for another round of quantitative easing, or QE3 as it is humbly referred to in the media outlets. QE3 is essentially the Fed inflating its way out of the trouble by injecting money into our markets. The injection, good for stocks, bad for interest rates, will encourage people to dump their mortgage backed securities holdings and return to the stock market which would force rates back up immediately. In addition it would lead to higher costs for the day to day goods we need to live.

QE3 - an evil plan that should be killed and put to rest immediately without further consideration.

Let's hope this is their position.

All in all our market is holding but bleeding slightly, pay attention to the wound and make sure it doesn't get any larger.