Market Commentary: This holiday abbreviated week will likely see mortgage interest rates bounce around in a very narrow trading range as investors do little more than “mark-time” before the release of Friday’s June nonfarm payroll report.
The majority of your mortgage investors have already priced expectations for a weak June employment figure into your rate sheets. A report that matches up with these expectations is highly unlikely to provide much in the way of a noticeable improvement for mortgage interest rates.
My technical trading models are suggesting the strong rally that developed in the stock markets on Thursday, June 28th will likely run out of upward momentum on or about Thursday, June 5th. If this projection proves accurate, expanding selling pressure in the stock market will tend to drive capital into the relative safe haven of Treasury debt obligations and agency eligible mortgage-backed securities – a condition, should it develop, likely to prove supportive of steady rates.
In my opinion the mortgage market has entered a “no-man’s land” of sorts. The potential for mortgage interest rates to move notably lower from currently levels is very limited – while the immediate threat mortgage interest rates will move sharply higher remains relatively benign as well.
I think the current risk/reward relationship offered by the mortgage market makes it exceptionally difficult to justify taking much if any interest rate risk. I doubt many among us would be willing to wager a dollar in hope of winning 25 cents on a single flip of a fair coin – and those who would make such a bet -- would probably choose to do so simply for the adrenaline-rush rather than holding any real rational expectation of making money playing the game over the long run.
I don’t disagree with borrowers/originators that choose to aggressively “float” loans – I’m just suggesting there are far better times than others to employ such a strategy. According to my models -- this is not one of the best times to be betting big.
