Mortgage Rates Hold Steady

Mortgage rates held steady today after spending the past 2 business days recovering from the worst day in more than 2 years last Thursday.  As we discussed yesterday, those 2 days of gains have erased more than half of Thursday's carnage, but today's sideways move means rates are still slightly elevated compared to most of the past few weeks. 

Crude oil remains under $40.00 today, price volatility this morning but by the end of the session not much change. Global economic slowdown and oil producers have no intentions of slowing output driving all commodities lower. The standoff between major global energy producers that has created an oil glut is set to continue next year in full force, as much because of the U.S. as of OPEC.

Long term debt (10s and 30s) are overall holding well - the 10yr has not had any sustainable selling, but equally no sustained buying. The note has traded between 2.36% and 2.20% since early November. MVS prices following along with days of selling and days of buying. Interest rates are increasing steadily at the middle of the curve (5yr); same with the short end (2yr). Markets reflecting a rate increase by the Fed next week.

Next week the FOMC meeting with the final word on rate increasing; consensus remains the Fed will move. Do not even want to think about what markets would do if the Fed does not do the deed. Also with the policy statement the Fed will release its quarterly revisions for growth and inflation outlooks. The quarterly assessments for most of the last 18 months have continued to be revised lower for growth. Yellen also will hold her press conference after the anticipated rate increase at which we expect her to sooth markets with indications any further rate increases will be “gradual”.

In summary, all the work is neutral - not bullish. Volatility remains at high levels. I do not like being long or short here. Best to stay out and watch instead of taking a position now - we are not large investors or money managers, just lowly mortgage people. Our career is not on the line so let the markets settle and the Fed to do want markets believe. With short term rates at these lows most of the increase in the FF rate are already priced in.