In A Word:

It may get worse before it gets better as MBS and treasuries are both peeling off between a quarter to three eighths of a point.  But relief may be in sight.

To Lock or Float?

Any time now, we will have the "oh crap, prices are a bit too low" rebound.  If you want to try and time that rebound, the payoff may not be worth the risk.  Until further notice, we can probably float until lock cutoff.  At that time, if prices are relatively the same as they are now, locking is still the better bet based on the curve's trends.  The curve suggests we have about another 10/32nds to fall before we reach our next floor.

The Numbers:


6.0% FNMA OTR is down by 7/32nds

5.5 FNMA OTR down by 8/32nds

The News:

  • Trade Balance
    • Actual: $60.9 billion
    • Consensus: $59.5 billion
    • being so close to expectations, this is having little, if any, impact on the curve
  • Rosengren and Fisher Speak (not together)
    • Dallas Fed pres Fisher says global inflation complicates policy decisions.
    • Rosengren: core inflation has little to do with high oil prices
    • It doesn't appear these comments are moving markets


Things have certainly been slippery this past week, and now it is continuing into this week.  Fortunately, there is some support for it from a technical read of the data.  The same data suggests we *probably* don't have too much farther to fall before stabilizing and potentially coming back.  In the past few recessionary periods, rates have held lower for longer than they have so far during this one.  By that logic, we would hope to see them come back down.  However, we have the Inflation Boogie Man still lingering.  Just when they think he's gone, someone mentions him.  Is he as scary as some think he is?  We'll probably never get a chance to find out.  But it does seem that the Knights who Say Ni (fed) are starting to perceive inflation more like the word "it" and less like a shrubbery.  So although we've seen some fantastic rate resiliency in the last several months, the next few weeks will be crucial in predicting whether or not it will stay around.  Be safe.