1/14/08 - So Far So Good

The day is young, but in early trading, despite a slightly stronger reading from the Dow and the 10 year treasury, Mortgage Backed Bonds are actually improved slightly.  They have been holding anywhere from .125 to .25 improvement over Friday.

A lot can happen between now and when rate sheets are released, but early signs are pointing to another day of improved pricing.

 Again, the higher we push bond prices, the more and more the safe bet is to lock.  This despite the probability that rates will continue to improve as the economy recognizes it's weakness.  Traders will be looking for any signs of strength this week.  If they get them, they will the market will respond more sharply than it would to an equal measure of bad news.

In other words, bond prices are testing the upper limits of their historical figures and are at an extremely high point above their moving averages.  This always creates some resistance for further improvement based on the technical read of the data.  This resistance can serve as a tailwind should any of the data this week point to strength in the economy.

 Lock Comment: Though I do feel that the economy will continue to worsen to some extent overall and in the medium to long run, thus improving mortgage rates, I must caution you about these technical factors.  At the first sign of economic strength, bonds have the potential to bounce back down sharply (prices down = rates up).  It's a risk you have to decide if you're willing to take based on what you know about the loans in your pipeline.  If indeed we continue our recessionary slide, the risk will have proved to pay off.  But again, despite the continued trend downward and the probability of better rates mid to long term, it's still the safest bet to lock.  The caveat is that you can definitely float through today as long as you keep a sharp eye on stocks and economic news.  Be ready to lock at the first sign of economic strength.

Best PAR NOTE rate today should be around 5.25% on a 30 year Fixed.