Fedspeak Causes Rates to Move Higher

After hitting the best levels in just over 2 months yesterday, mortgage rates bounced moderately higher today.  Coincidence or reality? I noted yesterday we had achieved the goal when the 10yr hit its key resistance and again this morning.  But when Atlanta Fed Pres. Dennis Lockhart came out with his comments this afternoon saying he was ready to increase rates in September, it seemed like he was the “Almighty Guru” and that people should follow suit.  Can you say Fedspeak?  Timing is interesting that he commented when the markets were about to sell off going into the ADP and BLS jobs report, and after three sessions that took the bellwether 10yr from a high at 2.32% to yesterday’s 2.14%. His remarks did hasten the retreat but there was more to it than that. Dennis Lockhart told the Wall Street Journal that it would take significant deterioration in economic data to convince him to put off increasing borrowing costs in September.

Will the Fed increase the FF rate in September? It remains uncertain regardless of Lockhart’s comments. This on again off again debate on the timing of an increase has been on the front burner for months now and swings media attention and short term traders on any Fed official remark.

Look for increased volatility tomorrow through Friday’s employment report.  The movement today does not yet change the technical bullish bias, but to break the bias the 10yr will have to climb back over 2.30%. In the meantime best to stay locked, especially on loans close to closing. It was nice ride for the last couple of weeks. As Janet Yellen continues to say, it is data dependent.

In summary, mortgage rates worsened, ever so slightly, today, but I do not view that as anything more than positioning before the employment data scheduled to be released over the next 3 days. Rates are the best they've been in 2 months and I do not see any reason you should not lock up these gains and avoid the risk moving forward.