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The stock market rally that began yesterday afternoon extended into overseas trading last night and into this morning's trading session. Optimism in equities led investors to sell flight to safety positions in risk free Treasuries which pushed benchmark interest rates higher and led mortgage-backed security prices lower. This forced lenders to offer higher mortgage rates this morning. However, the day did end on a positive note for mortgage rates as the S&P slide from the highs of the day and closed in the red. The late day selloff helped MBS rally off their price lows all the way back to their high of the day. While no lenders repriced for the better, we avoided reprices for the worse. I would like to say the stock sell off set us up for a mortgage rate rally tomorrow, but that would be guess work in this volatile environment. ...

Following the seemingly bottomless rates selloff that occurred on Monday, benchmark Treasury and MBS prices underwent a corrective rally yesterday. Buying beget more buying and before we knew it, the 10yr Treasury note yield was back under 3.50%, helping MBS prices move considerably higher. A strong auction of $44 billion 2 year Treasury notes helped add momentum to the rally as well. MBS prices held into the close which allowed many lenders to republish rate sheets for the better, lowering consumer borrowing costs. Again, MBS have moved back into the well defined range which we have used as a gauge of lock/float strategies. To remind readers, since MBS prices began trading in a range, borrowers have had great success floating when MBS prices were at the low side of the range and locking when MBS were at the high side of the range. The last couple days, MBS have been testing the low end of the range, thus my recommendation for floating. With yesterday’s rally, MBS have moved comfortably into the middle of the range and mortgage rates are lower. ...