Mortgage rates were convincingly higher today, continuing last week's move toward the levels not seen in over two years. Those levels were reached by some lenders today as they rose above July 5th's highs, while others aren't quite there yet. On average, today's rates are slightly higher than July 5th, but only by a small margin. 30yr Fixed best-execution was already up to 4.75 on Friday and some lenders moved into 4.875 territory today.

As we discussed on Friday, markets continue to take a defensive stance against the prospect of the Fed reducing the pace of their asset purchases. As investors withdraw from bond markets, the prices of mortgage-backed-securities (MBS) fall, forcing lenders to offer higher rates. The combination of the Fed asset-buying speculation, seasonal absences among market participants, and debate over the next Fed Chair nomination is creating a very uncertain environment where traders are more apt to trade according the momentum. One analogy is that it's easier to go with the flow of the current than to swim against it.

That's essentially what's making this run higher in rates seem so effortless and incidental over the past two days. That also makes it hard to know where the current ultimately leads. It could be that rates have further to rise before they level-off again or that they would have already leveled-off if not for those environmental factors that advocate uncertainty. The next big opportunity to shed light on this question arrives on Wednesday afternoon when we get the Minutes from the July 31st Fed meeting. Everything between now and then is potentially risky.

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