Mortgage Rates Hit Resistance

Wednesday after Labor Day... yesterday we enjoyed gains all day until the final hours of trading when the market sold off to a zero sum day. This morning we opened low and the sell off continued as equity markets rallied. Fortunately the MBS market has rallied since the low price point of 104.03 and we are now back up to a price point of 104.10... Still down 4 ticks on the day, but a nice recovery to say the least.

Rate sheets this morning, to say the least, were disappointing. This fact is probably due to the sharp initial sell off we experienced right around the time rate sheets would have been released. This recovery, assuming it holds should lead to reprices for the better as the day continues on.

Think it is clear interest rates and the mortgage backed securities market is taking its cue from equities and the treasury more than ever. It is a back and forth trading environment where traders are moving between long term and equity markets trying to find the best returns for their captial. Unfortunately the flip flopping is forcing volatility indices through the roof and leading to more uncertainty. All things considered it appears as though low rates are here to stay but we will flip flop between good and bad pricing.

For this reason it is critical to pay attention to rate sheets and be prepared to lock at the appropriate time. Kind of like cooking chicken... take it off the grill too early and you're going to be sick, leave it on the grill too long and you're eating rubber.... it's all about perfect timing. Patience is key and executing when the time is right is critical. While lower rates are a distinct possibility, we have to consider the fact that this may be as good as it gets and must be willing to settle in the range we are currently trading.