News You Can Use from Gary Moore

Mortgage interest rates treaded water this week after spending a month going in one direction---up. Stocks ended the week little changed, although the Dow index set fresh, two-year highs before closing down slightly on Friday at 11,492.

This week's action in mortgage-backed securities does not change the fact that the short-term trend---or, line of least resistance---is up for rates, and down in price. Price and yield/rates move in opposite directions with bonds, Treasuries and mortgage instruments.

We remain in a range of all-time low rates, and regardless of the trend, markets do not move in one direction without choppiness and backing and filling. Another truism about markets is that the climb up is longer than the fall down---or, as someone recently put it, the market takes the stairs up and the elevator down. That is to say that rates will go up faster than they went down.

Chicago Board Options Exchange Volatility Index (VIX) closed at an eight-month low on active call buying---down 7.36% at $16.11, although the market traded flat on Friday. This level of complacency in the market could foretell an overdue selling spell. Volatility is low in an up market and increases in a down market.

VIX total put volume (the right to sell stock at a certain price) of 124,000 contracts compared to call (the right to buy at a certain price) volume of 341,000 contracts. Put-call ratio is often used as a sentiment indicator, and when the balance gets skewed too far in one direction, it can signal a turning point. The put-call ratio was at about the same 3-to-1 ratio in April before the market experienced a sharp selloff. When the VIX is low and when the put-call ratio shows extreme call buying, the market is seen as complacent and excessively bullish and thus vulnerable to selling.

The 10-year Treasury note, which often correlates with mortgage rates, closed Friday at 3.33% after touching and recoiling from 3.5% in mid-week. That was only 4 basis points higher than the previous Friday's close.

Trading volume in all markets will be thin for the remainder of the year. That could lead to exaggerated swings in one direction or another. If we have a day when rates spike down a bit, it could be a fortuitous day to lock a rate for anyone who has his or her application in the works---for either a refinance or a purchase.

Contact me to prepare homeowners a refinance scenario, or to pre-approve a prospective buyer or to provide marketing tools for Realtors and

Builders. Gary Moore 615-579-8658, email Gary@BrentwoodHomeLoan.com.

First Community Mortgage is part of a locally owned community bank, and we control the loan process in-house as we underwrite all conforming and government loans. We fund the closings with our money, so no one has to wait on a distant division of a massive corporation to send funds.

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...by Gary Moore

Mortgage Planner, First Community Mortgage

...a subsidiary of First Community Bank

Cell: 615-579-8658 Toll-free fax: 866-321-6513

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(0% points, 1% origination. Market Update informs consumers and Realtors on market trends, offers subjective opinions and is not a quote for a unique borrower. Reply "remove" with your name and email address to discontinue Update.)