What is happening to interest rates?

Start by floating interest rate locks this morning but stay alert to instant re-pricing alerts. Likely not much movement until at least 2:15 this afternoon. I monitor and track  interest rate markets every minutes.  When I locked interest rates on loans yesterday afternoon, my average client paid a .25% lower interest rate on their 30 year foxed rate loan.

Started soft this morning with the 10 yr once again testing the 3.50% level; so far it has held again. At 8:15 this morning the 10 yr -8/32 3.50%, mtg prices -5/32 and the DJIA at +51. At 9:00 the 10 -7/32, mtgs -4/32 and the DJIA +66. At 9:30 the DJIA opened +65, 10 yr note -11/32 at 3.51% and mortgages -4/32.  The markets right now are trending towards higher interest rates.

The ADP jobs report for Oct at 8:15 was weaker than what had been thought, non-farm jobs excluding government workers -203K; forecasts were a decline of 190K. Manufacturing jobs however, down 53K was less than expected and less than what has been the case over the last several months. There was little reaction in the interest rate markets to the data; treasuries and mortgages were already at key support and held.

Earlier this morning at 7:00 the weekly MBA mortgage applications; the composite Index, a measure of mortgage loan application volume, increased 8.2%. The refinance Index increased 14.5% from the previous week but the purchase Index decreased 1.8% from one week earlier. The four week moving average for the overall market Index is down 5.5%. This seems to be a reaction to lower interest rates.

The ISM services sector data at 10:00; the overall index was expected at 51.5, was weaker at 50.6 frm 50.9 in Sept. New orders were better at 55.6 frm 54.2, price index at 53.0 frm 48.8 and employment declined to 41.1 frm 44.3. No noticeable initial reaction to the data.

Now through 2:15 this afternoon the rate markets are likely to sit quietly at key support levels for the yield on the 10 yr and resistance levels for mortgage backs on the price chart you can see on the Market Insights at MBS Tracking (suggest taking a look at FNMA 4.5). Traders and investors will keep their heads until the statement is released and analyzed. The focus on how the Fed may possibly adjust the wording in the statement that would provide more wiggle room on how long the Fed will leave the FF rate at zero. Not likely there is any thought of increasing rates anytime in the next six months, but as have noted previously, markets won’t sit back and wait for the Fed to act; by the time the Fed actually moves markets will have already discounted it. The point being, while no rate increases are in the offing, the path is definitely up for rates from these levels (and of course the obvious caveat; if equity markets were to implode rate markets will benefit).

At 10:10 the 10 yr note is sitting right on its support at 3.50%; mortgages are backing off their resistance as treasury rates move higher.

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