Mortgage Rates Takes A Breather
Mortgage rates took a breather today after rising
quickly the last two days. Saw a little selling this morning, but this
afternoon treasuries and MBSs came back to unchanged on the session. The 10yr
still holds its support but earlier today the 10yr climbed to 2.14% above the
2.12% support before falling back this afternoon on very light volume ahead of
tomorrow’s ECB announcement of the QE long-awaited. Will the bank do a shock
and awe, or just another half-hearted attempt to revive the economies in the EU
that are inching closer to deflation every week? Friday is employment are also
keeping the bond and mortgage markets in check.
Beside the ECB announcement tomorrow, weekly claims, Q4 productivity and unit labor costs and January factory orders. It is not likely markets will move much tomorrow ahead of the February employment data on Friday. The report always increases volatility - it rarely is what markets expect.
The Fed released its Beige Book this afternoon; there was little new information in this release. The Fed said that a stronger dollar and cheaper oil was depressing activity in several sectors.
Republicans in the House gave Yellen grief when she testified last week for being too political. The Federal Reserve was well aware in 2009 that its emergency steps to save the U.S. economy were trespassing on political ground and would have repercussions on Capitol Hill. Federal Open Market Committee transcripts released in Washington on today showed officials knew their actions would have consequences. They are still dealing with the fallout from Congress, where some lawmakers say they have mixed politics with policy. Still, the Fed had no choice in 2009 as Congress and the Administration had nothing to say or do; and yet still not a good idea to get Congress involved with monetary policy. Fed Chairman Ben Bernanke predicted political implications for ballooning the Fed’s balance sheet, Dallas’s Fisher feared asset purchases monetized government debt and Governor Elizabeth Duke fretted about Fed independence, according to the released minutes.
In summary, you should take your risk tolerance into account when deciding to float or lock. Technicals remain bearish, Friday is likely the pivot, if employment does not meet expectations the 10yr is likely to Improve and as always take MBSs with it. I am still in the meantime - bearish. However, it is all that you can stomach to remain floating as the volatility is tremendous. I continue to believe though that increases in interest rates this year are likely to be minimal.
Beside the ECB announcement tomorrow, weekly claims, Q4 productivity and unit labor costs and January factory orders. It is not likely markets will move much tomorrow ahead of the February employment data on Friday. The report always increases volatility - it rarely is what markets expect.
The Fed released its Beige Book this afternoon; there was little new information in this release. The Fed said that a stronger dollar and cheaper oil was depressing activity in several sectors.
Republicans in the House gave Yellen grief when she testified last week for being too political. The Federal Reserve was well aware in 2009 that its emergency steps to save the U.S. economy were trespassing on political ground and would have repercussions on Capitol Hill. Federal Open Market Committee transcripts released in Washington on today showed officials knew their actions would have consequences. They are still dealing with the fallout from Congress, where some lawmakers say they have mixed politics with policy. Still, the Fed had no choice in 2009 as Congress and the Administration had nothing to say or do; and yet still not a good idea to get Congress involved with monetary policy. Fed Chairman Ben Bernanke predicted political implications for ballooning the Fed’s balance sheet, Dallas’s Fisher feared asset purchases monetized government debt and Governor Elizabeth Duke fretted about Fed independence, according to the released minutes.
In summary, you should take your risk tolerance into account when deciding to float or lock. Technicals remain bearish, Friday is likely the pivot, if employment does not meet expectations the 10yr is likely to Improve and as always take MBSs with it. I am still in the meantime - bearish. However, it is all that you can stomach to remain floating as the volatility is tremendous. I continue to believe though that increases in interest rates this year are likely to be minimal.
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