How low have rates gone in this most recent rally? Low enough that the Mortgage Bankers Association is reporting a 21% surge in mortgage applications last week.
Today's ADP report beat expectations. In this week's mortgage rate predictions, we cited the ADP report and Friday's non-farm payrolls report as the big drivers for the week. We still think Friday will be the definitive break out day for rates. It still looks like the risk-reward is 2:1 in the favor of locking. We're still right at 5% on the 30 Year Fixed and it is probably equally likely that rates dip .125% or jump .25%.
Budgets that have $1T+ deficits mean that the Treasury needs to raise a lot of money. Here is just next week's schedule:
- $40B 3-yrs Tuesday
- $25B 10-yrs Wednesday
- $16B 30-yrs Thursday
Eventually this supply will put pressure on rates. This is a graph of today's pricing on a few securities. While mortgage rates are currently unchanged, the 10 Year yield is up .33% today. There is no direct relationship between the 10 Year and today's mortgage rates, but they eventually need to head in the same direction. Fortunately today's sell-off has been limited to Treasuries...so far.
