Mortgage rates are reprising past trauma, now matching the scope of the late 2010 sell-off, with the past two days matching the scope of Black Wednesday’s sell-off.

“Selling” in this case, refers to the Mortgage-Backed-Securities (MBS) that most directly affect rates.  As MBS prices fall, rates rise.  The faster this happens, the worse it is for rate sheets, and despite the month and a half of selling, the past two days have been surprisingly abrupt for lenders.  Rate sheets have taken the most profound hits we’ve seen on back to back days (past examples were more concentrated on one of the two days).

Conventional 30yr Fixed best-execution is quickly up to a staggering 4.375%-4.50% (with no points) though we’d note that there’s even more variation between lenders as volatility magnifies the effects of different pricing strategies.

Today’s economic data had precious little effect on trading levels, adding to the sense that it’s going to take official employment data on July 5th, a change in tone from the Fed, or an unexpected tape-bomb style headline to convince markets that the Fed won’t begin curtailing asset purchases in September.  While that continues to be the case, interest rate movements continue to be a risk.

We’d like to say “we’ve moved high enough, fast enough that we’ll probably be able to dig in and hold some ground here,” but that’s not safe yet.

Market participants themselves, let alone mortgage lenders, are still feeling out the post-Fed-Announcement environment.  There’s no reason rates can’t go even higher just because they’ve moved so high, so fast.


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