Mortgage Rates Not Able to Improve

Mortgage rates were not able to build on yesterday's modest improvements. Key stocks index were all over today but at the end of the day not much change from yesterday. There is not anything now more important to markets than next week’s FOMC meeting. Markets have to endure a few more days and talking heads have fiver more sessions to debate, but in the end there is no consensus now about what the Fed will do about moving the FF rate higher next week.

Treasury sold $13B of 30yr bonds this afternoon, re-opening the 30yr issued last month. The auction met with very strong demand particularly from foreign investors and foreign central banks - the highest indirect bidding on record. Yesterday’s 10yr also a decent auction but the 30 today blew the doors off. No major reaction to the strong auction though. Focus is on the FOMC next week.

Two data points tomorrow with August PPI and the U. of Michigan consumer sentiment mid-month index.  We could ramble on and on with market minutiae, but I will not do such.  You know what is out there and there is not much more to add. I thought about floating to start off today, and it was a good call that I suggested if you were a risk taker, do so with caution. 

In summary, mortgage bonds continue to trade in a very tight range.  We did get a pretty good auction today but it failed to spark any kind of rally.  Mortgage bond use to do well when equities tanked like they did yesterday and suffered when they rally like today.  The old ruled do not appear to apply.  We have not had a trading range this narrow for mortgage bonds in over 12 months.  We have a big move ahead and we may not know the direction until the Fed meeting next week.  The best bet is to stay locked for those closing in the next 30 days.