Mortgage Rate Update September 29, 2014

Mortgage rates continue to improve after rising in mid-September.

If I told you that mortgage rates are benefiting from geopolitical tension this morning you’d likely assume that headlines regarding conflicts in Ukraine or Syria are the cause.  In fact, Hong is grabbing attention this morning.

Despite government calls to disperse pro-democracy protesters in Hong Kong took to the streets again on Monday.  On Sunday Hong Kong police clashed with protesters and used tear gas to try and break up the demonstration.  Believe it or not this event is impacting financial markets around the globe.  As I’ve stated numerous times on ‘rate update’ investors do not like uncertainty and when it grows US interest rates benefit (see HERE).

For now the “flight-to-safety” is trumping new economic data but even so its worth noting the economic calendar is busy this week.  Earlier today the Labor Department released its latest reading on the Personal Consumption Expenditure Price Index (PCE).  The Fed’s favorite gauge of inflation showed that prices only increased by 1.5% on a year-over-year basis in August.  Since inflation is the primary driver of interest rates this is a good sign.

From a technical perspective mortgage-backed bond prices have pierced above a ceiling of resistance so we’ll float as long as we can hold this.

Current Outlook: floating bias