Rates Hold Near 3-Month Highs, Demanding Defensiveness

Mortgage rates continued higher at a relatively faster pace this week, matching the worst 2-week pace since the US presidential election. At issue is the potential for the European Central Bank (ECB) to embark on a Fed-style "tapering" of its bond-buying program. When the Fed signaled a potential end to its bond-buying program in 2013, it caused the so-called " taper tantrum ." Europe is now at a similar crossroads, and while markets may be better aware of the consequences this time (and less certain that tapering means the end of low rates forever), it is nonetheless seen as an opportunity for traders to push rates back toward higher levels for now. The most prevalently-quoted conventional 30yr fixed rate is back up to 4.125% on top tier scenarios with some lenders as high as 4.25%. A few

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