Current Mortgage Rates for Wednesday, December 24, 2014

So much for the prediction that mortgage rates wouldn’t change much before the end of the year. Yesterday mortgage bonds took an absolute beating.  Bonds broke through key levels of support, and just sort of went into free-fall in the afternoon.  The sell-off was kicked off by a strong third quarter GDP reading, but I think yesterday was really about an illiquid market and low trading volumes as much as anything.  We’ll see if yesterday’s momentum carries into today or not.  As of now mortgage bonds are in the red once again, and rates are under upward pressure.

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Today’s Economic Data:

The only release of import today is the weekly jobless claims report, which came in a little better than expectations.  I seriously doubt anyone really cares too much about this today.  The markets close early today, and most people who aren’t already on vacation (ahem) are thinking about travel and the holidays.

So What Happened Yesterday?:

As I mentioned at the top, yesterday’s GDP report was really strong (showing +5.0% growth in the third quarter), and that kicked off the sell-off.  However, some of the other data that was issued yesterday (Durable Goods Orders, New Home Sales, and Core Personal Consumption Expenditures) came in below expectations.  One would normally expect that would balance out the strong GDP report somewhat, at least enough to stanch the bleeding.

But that’s not what happened yesterday.  I think yesterday’s massacre was a result of an illiquid market (yesterday was one of the lowest volume days of the year, and had about half the volume of the ten-day average).  After bonds broke through key support levels, things just sort of snowballed. We do sometimes see this sort of thing around holidays.  If the sell-off continues after the new year, I think that’ll be something to be concerned about.  Given that the underlying economic conditions are largely the same as they were two days ago (a stronger-than-expected third quarter notwithstanding), I think we’ll recoup at least some of the losses over the coming days.

Have a great holiday, we’ll be back next week.

This Week’s Significant Economic Data:

Monday:

• Existing Home Sales: Expected: 5.20M, actual, 4.93M.

Tuesday:

• Durable Good Orders: Expected: 3.1%, actual: -0.7%.
• GDP: Expected: +4.3%, actual. +5.0%
• Personal Income and Outlays:

Wednesday:

• Weekly Jobless Claims: Expected 290k, actual: 280k.

Thursday:

• Markets Closed for Christmas

Friday:

• No significant data.

source: totalmortgage.com