Mortgage Rates Continue Higher After Yellen Testimony

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Mortgage rates moved slightly higher again today.  Fed Chair Janet Yellen provided her semi-annual testimony to the Senate Banking Committee this morning.  The financial markets that underlie mortgage rates saw quite a bit of volatility during the testimony, but it ultimately canceled itself out.  This left the secondary mortgage market in roughly the same position as it was earlier in the morning.  Unfortunately, that position was a bit weaker than yesterday's latest levels which were, themselves, the weakest of the day. 

In other words, after the smoke cleared, today's market movements confirmed yesterday's weakness, pushing rates higher.  That said, none of the recent movement in mortgage rates could be considered "fast-paced."  Today's increase just barely begins pushing the boundary between 4.25% and 4.125%.  By the end of last week 4.125% was more prevalent as a conforming 30yr fixed rate quote for the best possible scenarios.  After these past two days of weakness, 4.25% is more prevalent than it was, but hasn't taken the spotlight yet.

Loan Originator Perspective

"We're still close to recent lows, and without at any compelling data on the horizon, I think locking is a very conservative decision--an approach that I would very likely embrace. Until we make a decided move out of this range, I'd float at the highs and lock at the lows." -Brent Borcherding, www.brentborcherding.com

"If you can tolerate the risk, I think floating all loans overnight is the way to go. It appears we have some good support just overhead on the benchmark 10 year note at 2.57. Float the highs, lock the lows. " -Victor Burek, Open Mortgage

Today's Best-Execution Rates

30YR FIXED - 4.125- 4.25%
FHA/VA - 3.75%
15 YEAR FIXED -  3.375%
5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

The hallmark of 2014 so far has been a disconcertingly narrow range in rates.  Too many market participants bet on rates going higher in 2014, and markets have punished that imbalance with a paradoxical move lower. As of June, rates were officially lower year-over-year, but that's due to rates' path higher in 2013.  The current path in 2014 remains sideways.  European markets continue to play a nagging role in the background, generally helping rates in the US remain lower than they otherwise might be.  From a wider point of view, we're in limbo, waiting for the first significant move away from the narrow range.  A rally into late May stood a chance to act as this break, but rates have since returned to what were previously the lower limits of the 2014 range. As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.'  Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy.  It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).  Chief Operating Officer, Mortgage News Daily / MBS Live A former originator, Matthew began writing for Mortgage News Daily in 2007, covering a wide range of topics. Seeing a need in the marketplace, his focus increasingly shifted toward relating MBS and broader financial markets for loan originators. ... more

MBS RECAP: Weaker Trend Intact after Retail Sales and Yellen Testimony

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As far as today's market movers are concerned, Retail Sales was dwarfed by Yellen, but most of the reaction to Yellen cancelled itself out.  In other words, Retail Sales accounted for the only decisive push into weaker territory this morning.  Yellen accounted for bigger moves but deposited trading levels right where they had been after Retail Sales.

The damage was anything but severe with Fannie 3.5s not even down an eighth at the moment and 10yr yields up less than a bp.  That said, yesterday was more decisively weak and today's more active session now acts as a sort of confirmation of that weakness. 

This keeps the pressure on bond markets from a technical standpoint in that the possibility of a reversal back to the higher end of the rate range is still alive.  The saving grace was that 10yr yields bounced nicely at 2.57, which is not only a well-traveled inflection point, but also the mid-point for a few technical studies.  Bottom line, staying under 2.57 keeps hope alive.

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live. Pricing as of 7/15/14 4:42PMEST Today's Reprice Alerts and Updates 4:06PM  :  Ongoing Weakness Heading Into Last Hour; MBS Still Off Lows 11:27AM  :  Holding Ground/Moderate Bounce; Reprice Risk Pulling Back 11:01AM  :  ALERT ISSUED: Negative Reprice Risk is Increasing 10:33AM  :  ALERT ISSUED: Back Into Weaker Territory as Yellen Q&A Begins; Lows of the Day 10:07AM  :  Back in Positive Territory As Yellen Testimony Begins 8:45AM  :  Bond Markets Weaker After Retail Sales Matthew Graham  :  "depends what you're wanting your boundaries to represent. Definitely 2.66 is important on the high end. On the bullish side, there are more choices. 2.47 and 2.40 are long-term and fairly epic. But some people look at 2.47-2.51 as "2.5" and call it good. In general, it's hard to argue with that stance as trading has been compartmentalized between 3.0 and 2.5 for the most part since mid 2013" Andrew Haynes  :  "im looking at a long term range of 2.43-2.65 and short term of 2.61-2.51 does that sound about right MG?" Michael Mitchell  :  "Hey Guys- What Lender (Retail, correspondent, Wholesale) is still doing Interest only on Jumbo?" Andy Pada, Jr.  :  "i read something like 66%" Christopher Stevens  :  "anyone know Chase drop in mtg business year over year" Discuss the MBS and Mortgage Markets on Our Streaming Dashboard

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MBS Day Ahead: Another Yellen Testimony and Second Tier Economic Data

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When it comes to the Fed Chair's semi-annual congressional testimonies, the first of the two (in this case, yesterday's Senate Banking Committee) tends to get most of the market-moving potential out of the way.  That's not necessarily because the Senate asks smarter questions than the House, but rather simply because the prepared remarks are the same in both cases.  This time around, the prepared remarks garnered the biggest response.

Still... the House Financial Services Committee is always good for some entertainment value.  This is fairly important actually, because if you can't find a way to laugh at some of what transpires in these testimonies, anger and depression are real risks.

Before Yellen chats with Jeb and company, there are a few pieces of economic data.  The only potential market mover among them is Industrial Production at 9:15am.  Concurrent with Yellen's reading of prepared remarks is the release of the NAHB's Housing Market Index.  Markets have an on-again, off-again relationship with this report--mostly off.  Recently though, weaker-than-expected reports caught the market's collective eye, largely because the data had been incessantly bullish before that.  Some market participants inferred 'something's changed!'  And they were right.

Expectations now call for the bounce back to remain bouncy.  So stronger data is less likely to be meaningful here, but still potentially interesting to the mortgage and real-estate communities.

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live. Pricing as of 7/16/14 7:42AMEST Discuss the MBS and Mortgage Markets on Our Streaming Dashboard

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MBS Day Ahead: Another Yellen Testimony and Second Tier Economic Data

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Gain access to the most accurate real-time back month TBA indications from Thomson Reuters and Tradeweb. LEARN MORE MBS Day Ahead: Another Yellen Testimony and Second Tier Economic Data

When it comes to the Fed Chair's semi-annual congressional testimonies, the first of the two (in this case, yesterday's Senate Banking Committee) tends to get most of the market-moving potential out of the way.  That's not necessarily because the Senate asks smarter questions than the House, but rather simply because the prepared remarks are the same in both cases.  This time around, the prepared remarks garnered the biggest response.

Still... the House Financial Services Committee is always good for some entertainment value.  This is fairly important actually, because if you can't find a way to laugh at some of what transpires in these testimonies, anger and depression are real risks.

Before Yellen chats with Jeb and company, there are a few pieces of economic data.  The only potential market mover among them is Industrial Production at 9:15am.  Concurrent with Yellen's reading of prepared remarks is the release of the NAHB's Housing Market Index.  Markets have an on-again, off-again relationship with this report--mostly off.  Recently though, weaker-than-expected reports caught the market's collective eye, largely because the data had been incessantly bullish before that.  Some market participants inferred 'something's changed!'  And they were right.

Expectations now call for the bounce back to remain bouncy.  So stronger data is less likely to be meaningful here, but still potentially interesting to the mortgage and real-estate communities.

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live. Pricing as of 7/16/14 7:42AMEST Discuss the MBS and Mortgage Markets on Our Streaming Dashboard

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MBS Day Ahead: Yellen Testimony, Retail Sales, and Housing Data

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Last week was a dud in terms of scheduled events.  This week isn't the polar opposite, but it's much more active.  Monday and Friday are the only days without at least a few interesting items on tap. 

That said, merely knowing that there's a good amount of data on tap doesn't do much to suggest what will move markets.  We've seen more than our fair share of rates moving in the opposite direction from what the data seems to suggest in 2014.  That makes it hard to look ahead to particular events and say things like "if this report is strong, rates should rise."  Indeed, that hasn't been a safe way to assess the road ahead recently.

The technical landscape seems important.  That is, bond markets--either by coincidence or design--have keyed in on trading levels and ranges that have some of their own significance, regardless of the incoming data.  There's a whole mess of this 'technical' stuff in the 2.34-2.51 area in 10yr yields.  This is sort of the "no man's land" representing the journey between the most repressed yields in history and--well--everything else.

In 2014, yields were as low as 2.40 briefly, and recently returned to bounce around 2.50 on Thursday and Friday.  The risk to the low-rate outlook is that we're witnessing an extended bounce in this zone and a refusal to return to the mid-2011-mid-2013 range.  Incidentally, 2014's lowest yield represents a perfect bounce on 2011/2012's highs.

We can see these lines in the sand in front of us, but can't really know would get us across them.  There are candidates to be sure, but good luck when it comes to ranking them.  With economic data not producing consistent results, perhaps Fed policy is more worthy of attention.  With that in mind, Tuesday and Wednesday bring the semi-annual congressional testimony from Fed Chair Yellen.  Of the two, Tuesday is the bigger potential market mover.

Beyond that, geopolitical risk and European flights-to-safety (inspiring by things like Portugal's banking issues) are constant wild cards.  As far as economic data most likely to do what it normally does (where strength hurts bond markets), Retail Sales on Tuesday is probably the best bet.  Thursday is no slouch, however, with several big reports and the weekly Jobless Claims data covering the same week as July's NFP survey (meaning this week's Claims data is perceived as more relevant by market participants).

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

MBS MID-DAY: Yellen Testimony Brings Volatility, but No New Momentum

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As expected, today's congressional testimony from Fed Chair Yellen was, by far, the biggest market mover in the room.  The volume and movement at 10am dwarfed that of the 8:30am Retail Sales numbers.  All that having been said, the net effect is less than exciting and not at all far from yesterday's latest levels.

In other words, bonds were up and down following Yellen, but movement cancelled itself out.  There were no meaningful takeaways or surprises in the testimony or Q&A. 

Markets were ostensibly holding out for something more dovish in the initial remarks released at 10am.  When they didn't get it, bonds sold-off until hitting technical support at 2.57% in 10yr yields.  After bouncing there, MBS and Treasuries are both close to unchanged levels.

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.Pricing as of 7/15/14 12:36PMEST Morning Reprice Alerts and Updates 11:27AM  :  Holding Ground/Moderate Bounce; Reprice Risk Pulling Back 11:01AM  :  ALERT ISSUED: Negative Reprice Risk is Increasing 10:33AM  :  ALERT ISSUED: Back Into Weaker Territory as Yellen Q&A Begins; Lows of the Day 10:07AM  :  Back in Positive Territory As Yellen Testimony Begins 8:45AM  :  Bond Markets Weaker After Retail Sales Jeff Anderson  :  "Anyone else seeing clients hours cut vs layoffs? I have a loan closing Thur that almost wasn't. Due to seniority at the hospital someone moved to her department and forced a bump. Her and a co-worker literally had to go in to the back room to flip a coin to see who's hours were getting reduced from 40 to 32 hours. Been hearing that quite a bit lately. Crazy. Nice policy, but I guess it's better than layoffs." Matthew Graham  :  "I don't think it's funny at all AH. We have a vested interest in low rates, and thus an inherent cognitive bias that prevents truly objective analysis. It's in an originator's nature to root for lower rates and to analyze the data in the most rate-favorable light. " Andrew Horowitz  :  "its funny how with some reports you guys look to the internals to find the faults in the reports but on weaker reports you focus on just the headlines" Sung Kim  :  "huh? it's only good because it's not negative." Hugh W. Page  :  "Flip a coin. Heads - good Tails - bad" Sung Kim  :  "i am confused, are these retail sales numbers good?" Matthew Graham  :  "RTRS- US JUNE RETAIL SALES EX-AUTOS/GAS/BUILDING MATERIALS/FOOD SERVICES +0.6 PCT (CONS +0.5 PCT) VS MAY+0.2 PCT (PREV UNCH)" Matthew Graham  :  "but with "yeah buts"" Matthew Graham  :  "RTRS - US JUNE RETAIL SALES +0.2 PCT (CONSENSUS +0.6 PCT) VS MAY +0.5 PCT (PREV +0.3 PCT)" Discuss the MBS and Mortgage Markets on Our Streaming Dashboard

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Mortgage Rates Continue Higher After Yellen Testimony

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Mortgage rates moved slightly higher again today.  Fed Chair Janet Yellen provided her semi-annual testimony to the Senate Banking Committee this morning.  The financial markets that underlie mortgage rates saw quite a bit of volatility during the testimony, but it ultimately canceled itself out.  This left the secondary mortgage market in roughly the same position as it was earlier in the morning.  Unfortunately, that position was a bit weaker than yesterday's latest levels which were, themselves, the weakest of the day. 

In other words, after the smoke cleared, today's market movements confirmed yesterday's weakness, pushing rates higher.  That said, none of the recent movement in mortgage rates could be considered "fast-paced."  Today's increase just barely begins pushing the boundary between 4.25% and 4.125%.  By the end of last week 4.125% was more prevalent as a conforming 30yr fixed rate quote for the best possible scenarios.  After these past two days of weakness, 4.25% is more prevalent than it was, but hasn't taken the spotlight yet.

Loan Originator Perspective

"We're still close to recent lows, and without at any compelling data on the horizon, I think locking is a very conservative decision--an approach that I would very likely embrace. Until we make a decided move out of this range, I'd float at the highs and lock at the lows." -Brent Borcherding, www.brentborcherding.com

"If you can tolerate the risk, I think floating all loans overnight is the way to go. It appears we have some good support just overhead on the benchmark 10 year note at 2.57. Float the highs, lock the lows. " -Victor Burek, Open Mortgage

Today's Best-Execution Rates

30YR FIXED - 4.125- 4.25%
FHA/VA - 3.75%
15 YEAR FIXED -  3.375%
5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

The hallmark of 2014 so far has been a disconcertingly narrow range in rates.  Too many market participants bet on rates going higher in 2014, and markets have punished that imbalance with a paradoxical move lower. As of June, rates were officially lower year-over-year, but that's due to rates' path higher in 2013.  The current path in 2014 remains sideways.  European markets continue to play a nagging role in the background, generally helping rates in the US remain lower than they otherwise might be.  From a wider point of view, we're in limbo, waiting for the first significant move away from the narrow range.  A rally into late May stood a chance to act as this break, but rates have since returned to what were previously the lower limits of the 2014 range. As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.'  Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy.  It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).  Chief Operating Officer, Mortgage News Daily / MBS Live A former originator, Matthew began writing for Mortgage News Daily in 2007, covering a wide range of topics. Seeing a need in the marketplace, his focus increasingly shifted toward relating MBS and broader financial markets for loan originators. ... more

MBS RECAP: Weaker Trend Intact after Retail Sales and Yellen Testimony

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Gain access to the most accurate real-time back month TBA indications from Thomson Reuters and Tradeweb. LEARN MORE MBS RECAP: Weaker Trend Intact after Retail Sales and Yellen Testimony

As far as today's market movers are concerned, Retail Sales was dwarfed by Yellen, but most of the reaction to Yellen cancelled itself out.  In other words, Retail Sales accounted for the only decisive push into weaker territory this morning.  Yellen accounted for bigger moves but deposited trading levels right where they had been after Retail Sales.

The damage was anything but severe with Fannie 3.5s not even down an eighth at the moment and 10yr yields up less than a bp.  That said, yesterday was more decisively weak and today's more active session now acts as a sort of confirmation of that weakness. 

This keeps the pressure on bond markets from a technical standpoint in that the possibility of a reversal back to the higher end of the rate range is still alive.  The saving grace was that 10yr yields bounced nicely at 2.57, which is not only a well-traveled inflection point, but also the mid-point for a few technical studies.  Bottom line, staying under 2.57 keeps hope alive.

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live. Pricing as of 7/15/14 4:42PMEST Today's Reprice Alerts and Updates 4:06PM  :  Ongoing Weakness Heading Into Last Hour; MBS Still Off Lows 11:27AM  :  Holding Ground/Moderate Bounce; Reprice Risk Pulling Back 11:01AM  :  ALERT ISSUED: Negative Reprice Risk is Increasing 10:33AM  :  ALERT ISSUED: Back Into Weaker Territory as Yellen Q&A Begins; Lows of the Day 10:07AM  :  Back in Positive Territory As Yellen Testimony Begins 8:45AM  :  Bond Markets Weaker After Retail Sales Matthew Graham  :  "depends what you're wanting your boundaries to represent. Definitely 2.66 is important on the high end. On the bullish side, there are more choices. 2.47 and 2.40 are long-term and fairly epic. But some people look at 2.47-2.51 as "2.5" and call it good. In general, it's hard to argue with that stance as trading has been compartmentalized between 3.0 and 2.5 for the most part since mid 2013" Andrew Haynes  :  "im looking at a long term range of 2.43-2.65 and short term of 2.61-2.51 does that sound about right MG?" Michael Mitchell  :  "Hey Guys- What Lender (Retail, correspondent, Wholesale) is still doing Interest only on Jumbo?" Andy Pada, Jr.  :  "i read something like 66%" Christopher Stevens  :  "anyone know Chase drop in mtg business year over year" Discuss the MBS and Mortgage Markets on Our Streaming Dashboard

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