Mortgage Rates Moving Higher Again

Mortgage rates have not been able to maintain last week's impressive move lower following the Fed Announcement.  At the time, rates were moving lower for ECONOMIC reasons.  At the risk of oversimplifying, the Fed essentially conveyed a gloomy longer term outlook on the economy and this tends to put downward pressure on rates. 

This appears to have no end. The Fed twisted around like a pretzel, afraid to move, now using the global economy as the reason to hide = absolutely in fear.  Several key Feds and others talked about what happened last week.  Everyone has an opinion – and everyone feels that there should have been more than what was given  in the statement than what was discussed.

James Bullard, St. Louis Fed, said this morning he wished the FOMC had made the move and did not put as much emphasis on global economic conditions as a reason to hold off. San Francisco’s Williams said he wants “a little more patience”. I have been in the markets since 1982, I have never seen something quite like this. The Fed cannot move, paralyzed. There is no inflation and likely there won’t be for two or more years but the Fed continues to talk about it as if it is just around the next corner. The Fed has been rumbling about a gradual increase in rates since last year, mostly worried about inflation but now its global markets. Markets here and around the world know its coming and if they have not made the adjustment by now, they are Rip Van Winkling. Recall last Dec when the talk was a March increase, then June and now MAYBE December.

Tomorrow nothing but July FHFA housing price index and the Treasury will auction $26B of 2yr notes.  I did not like the action today in the bond and mortgage markets. Your best bet is to lock, as I started to float but that quickly changed by midmorning.

In summary, bond markets gave back more of last Thursday's gains today, and remain within recent ranges.  As I have said before, it appears we will need remarkable motivation for rates to break significantly lower.  For now, your best bet is to lock unless you love to live with all this volatility and still feel there is some more to come.