The rally of the last 4 days continued this morning with the Fannie Mae 3.5 MBS opening up 7 ticks higher than yesterday’s close.    The excitement was short lived as profit taking started and continued for the better part of the day causing many lenders to reprice for the worse.   It is not unusual to see investors take profits after a rally, and can be quite healthy for the markets.

We did receive 2 economic reports this morning, Jobless Claims and Wholesale Inventories.  Jobless claims posted a 1k drop from the prior week to 287k, beating expectations of 294k while inventories rose 0.7 against expectations of only a 0.3 rise.  Both reports were immediately shrugged off by investors.

We also had our final auction of the week with the Treasury Department offering up $13billion of 30 year bonds.  The auction was somewhat disappointing with investor demand lower than recent auction demand.   With supply out of the way, the losses ended and yields moved sideways the remainder of the day.

Lastly, not helping today was a speech given by Fed’s Bullard where he stated the jobs report vindicates his view that rate hikes should come sooner rather than later.  This is in contrast to the FOMC minutes from yesterday  that painted a more dovish picture on the economy which sparked the rally that drove rates to the best level in well over a year.

Despite today’s modest losses, the downward trend for rates is still intact.  The most prevalently quoted conforming 30yr fixed rate continues to hold at 4.125%, with 4.00% available from some lenders for the very best qualified consumers with the best loan scenarios.
Loan Officer Perspective
The recent overall trend has been so favorable it is hard to consider locking into the strength.  Overall we have to keep in mind that we are in the best levels as far as rates and spreads for over a year and that must be factored in making a decision.  What comes up must come down, and vice-versa, therefore locking at these levels based on technical data available is an intelligent move.  My personal pipeline is floating through the rally, locking only loans that are cleared to close.  Typically, bullish trends tend to get over-bullish before the major selling occurs....I'm banking on that for the short term.  - Constantine Floropoulos, Quontic Bank

We’ve had a heck of a run and now would be a good time to get short term closings locked up.  Might we continue to move lower?   Sure.  But, with the ebbs and flows of the market, Friday ahead of us and Monday markets are closed, would you really want to risk some of the best levels of the year until Tuesday?  Think conservatively, lock and utilize renegotiations, if needed in the future. - Matt Hodges, Presidential Mortgage Group

With the downward trend in rates still intact, I am only locking loans that are within 15 days of closing.   If you wish to lock in the nice gains we have seen over the past week, today would be the day to do so.  We have a 3 day weekend coming up, and lenders tend to be conservative with their pricing on the Friday before the long weekend. - Victor Burek, Open Mortgage
It’s tough not to consider taking the nice run in the MBS and TSY markets and lock in the recent gains and improvements in pricing.  If closing within 30 days, I’d highly consider locking in the recent improvements you are sure to have seen in fee/rate.  If outside of 30 days, if you have some risk tolerance, I would consider floating in the short term to see if this recent push in the still confined range may break on the down side for rates.  - Steve Chizmadia, Sr. Mortgage Advisor, American Capital Home Loans

It's been a wild ride in both rate and equity markets over the past three days.  We lost some ground on rates today, but retained the bulk of yesterday's rally, which is always good to see.  It appears that European economic concerns are front and center in economists' and traders' minds, looks like worldwide economies aren't rallying anytime soon.  It's a tough call on lock/float today, those nearing closing almost certainly should lock;  those with 30+ days until closing MIGHT consider floating, as long as their approvals won't be in danger if rates creep higher. - Ted Rood, Senior Loan Officer