So I've done the evil deed of travelling into the Murky Price waters by trying to predict where pricing was headed on a daily rate sheet. I've sent an Alert to Lock a couple of times that turned out to be wrong. I've also sent a couple that turned out to be right.
Right now I'm at Par on my bets. I can tell you the last time I tried to be right about these kinds of things (2004) I had a much higher success rate. I believe it was closer to 80%. I saved my clients money back in those days and everyone was happy.
Today is, well, it's nucking futs. There seems to be no rhyme or reason to the way mortgage rates are trending in relation to Treasury Yields.
Since I've already gotten my feet wet in this area and because I've gotten more than 20 calls on this question I am going to try to interpret some great articles I found today. Also, I'll reference you back to the first couple of posts on Education on Station on how loans are securitized.
It used to be that 30 Year Bonds were effectively the nearest vehicle to a 30 Year Mortgage Note. And before Barry Habib and his spawn came around we would basically guess where Mortgage rates were trending based on this daily yield. The 30 Year Bond was made redundant in 2001 or 2002 (I don't remember). By 2002-2003 we were all watching the next best thing, the 10 year Treasury Note. It wasn't great but it was pretty good.
Bloomberg today has some features that will help illuminate where we are currently and why Mortgage rates continue to tick up while the underlying fundamentals give reason (at least historically) to lower Mortgage rates (remember these are murky waters at best for me).
1. From Bloomberg: Link Here:
The extra yield that investors demand to own agency mortgage-backed securities over 10-year U.S. Treasuries reached the highest since 1986, boosting the cost of loans for homebuyers considered the least likely to default.
The difference in yields on the Bloomberg index for Fannie Mae's current-coupon, 30-year fixed-rate mortgage bonds and 10- year government notes widened about 12 basis points, to 215 basis points, or 79 basis points higher than Jan. 15...
"There's basically a buyer's strike right now,''According to one Manager.
The so-called option-adjusted spread of Fannie Mae's current-coupon securities matched the highest in at least 11 years yesterday, rising 18 basis points to 134 points, according to Merrill Lynch & Co. index data.
An option-adjusted spread takes into account the impossibility of knowing when the underlying mortgages will be refinanced or otherwise paid off.
Also: Auctions have been performing Miserably
2. From Bloomberg: Link Here:
Almost 70 percent of the periodic auctions in the $330 billion market failed this week as investment banks stopped buying the securities investors didn't want. Yields on the debt averaged 6.52 percent as of Feb. 28, up from 3.63 percent before demand evaporated in January...
Goldman Sachs Group Inc., Citigroup Inc. and other brokers began permitting the failures last month after investors, concerned that insurers backing the bonds might be downgraded, stopped bidding in the auctions conducted every seven, 28 and 35 days.
So there you have it. We're out in the field trying to originate purchase money on newly cheap and declining home prices as well as muddle through declining markets with regard to refinances. We get some relief in terms of Loan Amounts increasing but in the end we're still getting the short end because there is so much continued uncertainty. ADD to this the new Adverse Market Conditions and Loan Level Price Adjustments from FNMA/FHLM and you might be able to see why Rates are where they are.

Frankly, if this market normalizes in the next couple of months (which is probably wishful thinking on my part) then we'll have 5-5.25% par rates 30 Yr. Fixed.
You've probably read some or all of what I've had to say over the last couple of months but if you haven't you can keep abreast of the change(s) and my commentary on my Blog Here:

Other Updates: Posted Here on Education Station:

With our Turn times at Just 2-3 Days and pricing as hot as it is you can't go wrong!