Mortgage bond prices were near unchanged last week holding mortgage rates steady. Trade was extremely volatile with swings of 1/2% in discount points common. The Treasury auctions were not as well
received by foreign accounts as traders were hoping. The US relies on foreign central banks such as China to fund our deficit spending. If China were to decrease or cease purchasing US bonds and notes, rates would rise.
Interest rates finished the week near unchanged.
The inflation data will be the most important releases this week. Inflation erodes the value of fixed income securities causing prices to fall and rates to rise. The Fed meeting will also take center stage. While no rates changes are expected the wording of
the release will be very important.
As we all know, mortgage interest rates change on a daily and intra-day basis. With so much volatility, it is often difficult to make the right decision regarding floating or locking. What is important
to remember is the fact that there is a difference between gambling and taking a calculated risk when making mortgage interest rate decisions. Floating into an economic release such as the employment report is usually a gamble, as was evident with the rate
spike the beginning of this month. In addition, floating over a span of more than a few days is also a gamble. Unforeseen events can cause instability in the financial markets that results in mortgage interest rate volatility. On the contrary, floating on
a day of positive market movement with no economic data the following day, while such action is still vulnerable to market movements, can be considered a calculated risk. It is possible for interest rates to push lower due to the uncertain future of the economy.
Unfortunately the recent focus has been towards rate increases, which generally don't bode well for lower mortgage interest rates. Taking advantage of rates at the current levels guarantees a historically favorable interest rate and protects against uncertainty
surrounding future interest rate developments.