Mortgage Rate Update October 21, 2013

Mortgage rates are modestly better to start the week.

Mortgage rates have benefited from fear and uncertainty regarding the government shutdown over the past couple weeks.  However, technical trading patterns may prevent mortgage rates from improving any further in the near-term.

Mortgage-backed bonds (MBS’s), which have an inverse relationship with mortgage rates, have traded up against their 200-day moving average twice in the past couple weeks but have not managed to break through this level.

102113 MBS
In the near-term I expect this technical layer of resistance will put a floor on mortgage rates but it doesn’t mean we couldn’t see rates improve later this fall/ winter.

Tomorrow, the Bureau of Labor Statistics will release the all-important jobs report for the month of September.  The report was originally scheduled to be released on October 4th but due to the shutdown it was postponed.  The markets expect 180,000 new jobs for the month.  I expect a muted response given that the data is a little old and does not fully incorporate the impact of the shutdown.  October’s release will be watched with closer scrutiny.

I will take a near-term locking bias.

Current Outlook: near-term locking bias/ long-term neutral