Mortgage rates surprisingly opened flat this morning, but as the day progressed, got better as the bonds again rallied towards the end of the trading session. However, the movement has been very small as the rates really were only affected by the fees between the rates. The stock indexes at the end of the day are about unchanged, there has been little movement in the indexes this week. The DJIA at one point today down 103 points but ended essentially unchanged. The WSJ chart shows the DJIA performance over the last year.

Treasury sold $28B of 7yr notes this afternoon, it was an OK auction but not a barn burner. All three auctions this week were nothing to write home about.

Alan Greenspan on Bloomberg today saying he is worried that bond yields have declined too much and prices are too high. "We get very nervous when the stock price index goes to high p/e, we ought to be somewhat nervous when the bond rate does the same," the former Federal Reserve chairman said. Greenspan also said the U.S. may be heading toward stagflation -- a slow-growth economy coupled with high inflation. He pointed out that there is a significant amount of uncertainty and "general sluggishness" in the economy, which is tied to low productivity.

We have a lot of data tomorrow, starting with the Q2 GDP, Q2 employment cost index, July Chicago purchasing managers index, and the U. of Michigan consumer sentiment index.

With the price improvements this afternoon from morning levels, nothing is wrong here on floating, but the data tomorrow could shake things up a bit. Also tomorrow morning we will know what the BofJ did with more stimulus. At present levels floating has additional risk because of the current low levels. Remember, the 10yr fell to 1.32% on the buying after the UK shocked markets with the exit vote.

In summary, Bonds are continuing to add to the gains from yesterday. With the new supply of treasury debt out of the way today, I continue to favor floating, but still lock if you are about to close in 15 days. Bonds are making a strong attempt at breaking the recent range to the down side which will hopefully result in lower rates and better lender pricing in the days ahead.