Mortgage Rates Rebound

Mortgage Rates rebounded today as the trading was better – and peaceful.  Durables this morning were weak if you looked into the guts of the report.  Durables have declined for seven consecutive months but have not stopped the equity markets from increasing, thanks to the Fed and other central banks literally forcing investors to stock markets. The bond market though is still holding well because increasingly more concern that the stock market may be headed for a huge decline. No one willing to say when, but there has been a sizable increase in bearish forecasts, not from Wall Street but from private analysts.

Next week, the main feature is the FOMC meeting on Tuesday and Wednesday. No increase in interest rates will be announced, the policy statement will continue to muddy the outlook about when the Fed will begin lifting off the launch pad. After chewing on each syllable the end will be that the Fed remains ‘data dependent’ as Yellen has said numerous times. Monday Treasury will auction $26B of 2 yr notes, Tuesday $35B of 5s and Wednesday $29B of 7s. Demand in the last two months has sagged a little, it will weigh on markets if demand is weak again. Q1 earnings will continue to drive stocks. Economic releases next week: Case/Shiller, consumer confidence, and Richmond Fed on Tuesday. Wednesday final Q1 GDP data, March pending home sales, FOMC policy statement. Thursday weekly claims, March personal income and spending (PCE a more important inflation measurement than PPI or CPI), Employment cost index, April Chicago PM index. Friday April auto and truck sales, ISM April manufacturing index, March construction spending. Normally employment data is reported on the 1st Friday of each month unless Friday falls in the 1st, then delayed to the second Friday.

In conclusion, this week investors were watching the Greek tragedy churn, NASDAQ made a new high recovering from 2000 a sure sign that if you hold long enough and can suffer unrealized losses you will be OK.  27 trading sessions that flat-lined the 10yr note between 1.92% and 1.86% (6BPS) on closes. MBS price on a closing basis in 27 sessions the range 46BPS. Lots of angst along the way but no real changes in the last month, and as I said before, it will take a jolt one way or the other to move rates significantly. Everything was holding a bullish bias until Wednesday, but that lasted only a few hours.  As long as the 10yr note rate does not exceed 2.02% on a close I will remain bullish that rates will decline. Until the 10yr drops below 1.86% it is a daily thing in terms of floating or locking. Wednesday next week should move markets on the FOMC statement. Again, I do not see any increase in rates this year.