Mortgage Rates Moved Today - UP

Mortgage rates have had very little movement over the past 5-6 weeks – until today.  This happens from time to time on the approach to events that have a lot of market movement potential such as the case with the FOMC Policy statement to be released at 1:00PM tomorrow.  Even before the events themselves, markets began taking a 'lead-off' in one direction or the other.  The time around, the lead-off happens to be toward higher rates.

The bond and mortgage markets took a hit early this afternoon. The 10yr ran to 1.99% before settling down, MBS price at one point down 42 bps in the heat of selling however did manage to hold within the range. This morning the Conference Board released the April consumer confidence index was the weakest this year. Consumer confidence had been increasing since December while the consumer was pulling back on spending since last November. This is a great example why one should not pay too much attention to the two monthly consumer surveys. Although I discounted the emotional indexes market lemmings continue to make something out of it. Basically, more confusion on the better way to judge consumer sentiment and confidence – try uncertainty.

This afternoon Treasury sold $35B of 5yr notes in what can be described as a good auction. However with weaker consumer confidence, this was not enough to hold interest rates from creeping slightly higher.

There are a few reports that will be coming out tomorrow morning that should not shake anything about – but then the biggie at 1:00PM.  Technicals are still holding after the selling today. However, with FOMC and GDP data in the morning, it is best to stay away. Any more selling would take the weakening bullish bias out of its bullish pattern. Watching the dollar lose its momentum over the last few sessions, as the dollar softens is also a negative to the bond and mortgage markets.

In conclusion, hopefully you have followed the advice of late and have locked in.  Tomorrow we get the first read on 1st quarter GDP and the FOMC announcement.  I do not see how GDP will help rates.  If it is worse than expected, it will be blamed on weather - if better than expected, rates will rise. So best case, GDP does not hurt us.  If you are hoping for better rates, then we need the FOMC announcement to at least indicate that rate hikes will be put off longer.  Very risky to continue floating at this time as the Fed seems determined to raise rates no matter what sooner rather than later, at least that is what some of the comments have led people to speculate.