Mortgage Rates Continue Downward

Mortgage rates continue down for the fifth straight day.  I have been warning that the end is close for equities, new of the reasons I hold the bullish bias for interest rates. More evidence building that finally markets in the US are beginning to fully understand that our economy is not going to hold up with most other global markets and economies slowing. I have noted numerous times about our technical indicators but mostly I do not get into it too deeply - this morning one of the people I follow closely published his recent technical analysis that confirms my own feelings on this.

Tomorrow Greece and its creditors will start again to discuss more money for the country.  Germany still resists any attempt to restructure Greek debts (forgiveness of some of it and extensions of terms on much of it). The IMF is all in the restructure but unless Angela Merkel gets in line Greece is not going to survive very long. China and Asian economies slowing rapidly, Europe hardly holding its head above water, except for Germany and it is showing increasing signs of slowing growth.

Here comes the Fed, the FOMC meeting starts tomorrow with the policy statement on Wednesday afternoon. The Fed, for all of the talk from officials, is in a huge bind now. Since economists have nothing to fall back on in terms of historical (past) situations like this everyone, regardless of how ‘official’ you believe they are, this is fresh soil they are walking on. No one believes the Fed will increase rates now, but most still are believing the Fed will increase rates this year, possibly in September. I still continue to say no as the Fed cannot increase rates now with deflationary forces increasing and global economic outlook deteriorating. Not only does the Fed not have any idea what will happen if it raises rates, the Fed is still out there talking about the US economic growth. If rates increase the dollar will strengthen more, strangling US exports even more and adding another hurdle for the US economy. Why are so many on board with a rate hike this year? Because in the world of Wall Street it is far better to run with the other lemmings than to stand alone; no one cares after the fact that the contrarian view was correct. You lose your job and credibility if you are wrong, so best to be with others as the ship goes down.

In summary, I noted this morning that I am not expecting any additional MBS price improvements with the FOMC meeting on Wednesday. It was quiet last Friday and tomorrow should be much the same. I remain positive that rates will move lower, as the tech works continues to be more bullish each day. Not discounting some struggles here in the near term but the wider picture looks good for the 10yr and 30yr treasuries to decline in yields pushing MBS prices higher and mortgage rates a little lower.