With 15 minutes to go in cash Treasury/MBS trading, the market is going out on the lows (highest yields/worst mortgage pricing) of the day

With 15 minutes to go in cash Treasury/MBS trading, the market is going out on the lows (highest yields/worst mortgage pricing) of the day.  Fed Governor Hoenig’s dissent looks to us like an interest rate protest or maybe it’s the first vote/trial balloon.

Traders were expecting the same old, same old and got sideswiped by the hawkish detail I just mentioned.  This one is a tough call, trying to figure out if it’s the beginning of a tightening cycle or the Fed’s way of testing the market towards removal of accommodation (stopping the Treasury/MBS purchase program, etc.)  With so many cross currents it’s tough to remember who’s on first.

I can tell you from a technical stand point that the market put in an outside day down, including a test of the best levels we’ve seen since November and then failing.  The rejection from the top and outside day down are strong indicators of a market top in the making.  This does not mean that the consolidation we expect will be huge, just that it has a very high probability.  Given the fact that the 8 day moving average held, sellers will need to trade the market above 3.65% for a sustained period of time to do any real damage.

For now, the brackets to watch are 3.65% to 3.57% (we are set to close right at 3.65%).  Anything outside these parameters to the high side is bearish for interest rates and below 3.57% is bullish.  Given the uncertainties on so many fronts, you should expect the unexpected right along with volatile trading and mortgage pricing.  Hopefully, the State of the Union Speech will give us a little help.

About Max Leaman Austin Mortgage

GREAT RATES, LOW FEES, CLOSE ON TIME™ ---- 2012 Ranked #1 Austin Residential Mortgage Lender (Austin Business Journal) 2010, 2011 & 2012 Five Star Professional (Texas Monthly) 2009, 2010, 2011, 2012, 2013 PrimeLending Chairman's Circle Award 2009, 2010, 2011, 2012 Scotsman Guide Top Originator (Top 200 Mortgage Professionals in U.S.A.) Better Business Bureau "A+ Rating" National Lender Rankings (Scotsman Guide): Top Purchase Volume (No. 10) Most Loans Closed (No. 32) Top Dollar Volume (No. 88)

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