Mortgage News Daily and Freddie Mac offer conflicting
reports on the bond market reaction Jerome Powell's speech yesterday.
Mortgage News Daily says Mortgage Rates Surge Lower
Mortgage rates surged lower today, falling at the
fastest single-day pace in more than a year. In order to see the average
lender offer lower rates, you'd need to go back to October 2nd at least. For
many lenders, it would be a few weeks before that. Granted, this merely
restores rates to what had been 7-year highs at the time, but you know what
they say about journeys of 1000 steps and what not...
Much of the improvement was driven by an ongoing
reaction to a speech by Fed Chair Powell from yesterday.
Surge Defined
A surge is 9 basis points.
Freddie Mac says rates fell 13 basis points. But note
the dates.
Freddie Mac posts mortgage data weekly, on Thursdays.
Thus, the data is stale. After that table was posted Freddie Mac offered a
different opinion.
Mortgage Rates Barely Move
Freddie Mac says Mortgage Rates Barely Move.
November 29, 2018
Mortgage rates stabilized the last couple of months
as interest rate sensitive sectors such as new auto and home sales softened
the outlook for the economy. Homebuyers pounced on the stability in rates as
purchase mortgage applications increased, which indicates that despite higher
mortgage rates this year there are buyers on the fence waiting for the right
time to buy.
Ignore that galling bit of propaganda about
homebuyers pouncing on rate stability as if buyers are coming back. They
aren't. Let's step back and put this alleged surge into perspective.
Zero Reaction
Fred uses Freddie Mac as its source for this series.
The highest weekly Freddie Mac rate since 2011 was
4.94% on November 8. It's now down to 4.81% but that happened a week before
Powell's speech.
The above chart does not necessarily negate the MND
analysis as MND surveys a number of lenders that may have reacted to Powell's
flea-ridden dog and pony show. But we can check. Mortgage rates closely
follow the yield on the 10-year Treasury.
Mortgage Rates vs 10-Year Treasury Yield
Mortgage Rates Peaked One Day After 10-Year Yield
Peaked
Flea-Ridden Dog and Pony Show
It's likely that the MND "surge lower"
Powell story is incorrect and that Freddie Mac is a better indicator of
timing even if not a better indicator of actual rates.
For discussion of Powell's flea-ridden dog and pony
show, please see Lovey-Dovey Interpretation of Powell Speech Sends
Stocks Flying.
By the way, nearly everyone, including me, attributed
the market surge yesterday to Powell. While Powell may have been the
catalyst, in retrospect, it's more likely the market was oversold enough to
rally on damn near anything he said.
Expect more sharp bear market rallies like that. This
process is just beginning.
