Mortgage Rates Improved Following FOMC

There is a reason why I do not gamble as today is a perfect example that even though I was in the minority stating that this should happen, when it comes to giving advice to people about their biggest monthly expense, I tend to be conservative and let them know of the risks versus the rewards.  Today was one of those days.  Mortgage rates plummeted today, relatively speaking.  While the average improvement might not look like much at face value, it was the biggest one-day drop we have had in 2015.

Data dependent! Patience is out as markets expected. I know I got it right, as the Fed will continue to be data dependent rather than lead markets by the nose with any time frames for an increase. The economy is not as strong as the Fed wants and inflation is way down the line according the Fed’s projections. This is the first sentence of the policy statement released: “Information received since the Federal Open Market Committee met in January suggests that economic growth has moderated somewhat.” In the last policy statement the FOMC said the economy was improving, now it has moderated according to the data, as I noted this morning. Everything is “moderating” - the Fed likes the improvement in employment but is not convinced yet that it is good enough to increase rates now and in June, now the lemmings are running amok again expecting a rate increase in Sept---not going to happen though, as I still hold no increases this year.

As far as I can see the FOMC has done a turnabout from the policy statement in January. Since the beginning of this year most all of the Fed’s forecasts and expectations have changed and it’s back to data dependent instead of a specific target. The take away is the Fed is admitting that it has little confidence about how the economy will perform this year - so markets are back to where we were in terms of anticipating when the Fed may start the lift-off.  The Fed has walked away from leading markets to any specific dates as has been the case for the last six weeks. The Fed and economists do not know any more about the future of the economy than my crystal ball that broke a few weeks back.

All of the technical models are now solidly bullish. The rally today remained mainly at the big banks as there was surprising ling little change in pricing that should have come forth in the markets.  As I mentioned this morning, pricing should have been better than it was, so with all this positive news and the trades that took place, we should have seen a drastic turn – maybe tomorrow. 

We still have a lot of volatility in the market, so with the weekly Jobless Claims coming out tomorrow, it is going to be interesting how the banks release these profits. That said, the trend now is for lower rates from today with room there even for bad news.

In summary, mortgage rates improved slightly today – but has yet been released into the market overall.  Today's Fed press conference has likely pushed back any chance at them raising rates to much later than initially expected, and the treasury market and Mortgage Backed Securities have rallied appropriately. Floating is a very good idea, in my opinion, to see if these levels hold and rates come down even further – but I gather most are waiting to see what happens in the morning.