Weekly Mortgage Overview: 7/8/2013

This Week

Last Friday’s stronger than expected employment report sent interest rates screaming higher with MBS prices down as much as 200 bps at one point in the day. It isn’t news that interest rates were headed higher; most investors have been bailing out of fixed income investments since early May. We have consistently noted that all data was pointing to increasing rates. What we are surprised about, though, is the magnitude of the increases; we thought the run up would find some temporary support at 2.60% for the 10-year note, but Friday the 10 climbed at one point to 2.75%. Mortgage rates are closing in on 5.0%.

This week Treasury will auction $66B of notes and bonds. Recent auctions have not been met with strong demand; if this week’s auctions don’t show an increase in demand, interest rates will suffer more price declines and rate increases. Expect continued high levels of volatility and use any rallies to get deals locked.