Mortgage Rate Probability: Sideways to Higher

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Rate Probability: Sideways to Higher
Last week ended with rates slightly higher. As the baseball playoffs start this week, unfortunately all the drama will not be on the diamond. In fact, this week might be the most volatile week of the year for the mortgage market.
Mortgage bonds have made a encore performance of July's downward price trend. (Which means rates have increased.) As amazing as it seems, at Friday's close bonds were priced at the exact amount that the trend reversed last month. Sounds good right? Well not necessarily.
This week boasts the biggie - The Nonfarm Payroll report. One problem, in the wake of Katrina and now Rita everyone expects the Nonfarm Payrolls for September to be a loss, and a huge one. Last estimates on Friday called for a loss of 172,000, but it seems this number is changing almost hourly and probably will until it's announced. Normally, a huge negative number would be all that is needed to reverse the upward trend in rates. However, since the loss of jobs comes complete with a blank check from Washington many investors are concerned that all the money being sent to the Gulf States will be a major inflationary spark, and they just might be right. Remember, inflation is the arch enemy of bond investors since inflation erodes profits, therefore investors demand higher rates.
So our advice for this week is hang on it might be a wild ride. And if you have any loans that are floating you should be ready with your lock ins ready and poised by the fax machine.