Mortgage Rates Continue to Hold Steady

Mortgage rates holding steady as we have seen both the US equity market and US bonds trading early this morning has been generally flat.  The Weekly Jobless Claims expected unchanged did increase a little, but the increase in claims is nothing to be concerned about, claims have been generally stable this year.

The March Chicago purchasing managers’ index, increased more than anticipated, but is still weaker than at the beginning of the year. The increase will lead traders to expect a better than expected national ISM manufacturing index due tomorrow after the March employment data.

Most of the focus today will be toward tomorrow’s March employment report. Yesterday ADP reported March jobs increased by 200K and was right on the forecasts. Tomorrow’s expectations are the same, but as I mentioned last night, the income is a major focus now. The other key for tomorrow is the labor participation rate, the percentage of eligible workers that are now working. In February the participation rate increased to 62.9% from 62.7%.

Looking for news today? Look oversees with the ECB – as they begin expanding debt purchases tomorrow in line with Mario Draghi’s announcement two weeks ago. Europe still struggling with its inflation goals - inflation was negative for a second month in March. So far no matter what the ECB has done inflation in Europe is still not improving. This is not a market concern today - today it is about the March employment report tomorrow in the US.

Janet Yellen’s remarks earlier this week took away any thoughts the Fed will increase rates soon. Some officials were floating an April increase - others were expecting a move higher in June. Yellen brought those hawks back with her concerns about global growth slowing. Although there is nothing certain about the Fed and when interest rates will increase again, but there is certainty now that Yellen is in no hurry to increase the FF rate as markets had been led to think from the hawks at the Fed, mostly a handful of regional Fed presidents. It is not out of reason that the Fed may not increase the FF rate this year.

The break below the resistance level at 1.85% for the 10yr note yield on Tuesday has held yesterday and so far this morning adding support in the momentum oscillators and the other technical indicators. As long as the benchmark 10yr stays under 1.85% (1.81% now at 11:00AM) the more positive the outlook will become for lower rates. Markets though are very touchy ahead of tomorrow’s employment data. Already this morning it is evident, when the Chicago index came out, the MBS went negative, but are again positive.

Continue to cautiously float your rates, unless you are closing in the next week and are happy where they are as I do not anticipate any big favorable changes.  If you are thinking about purchasing or refinancing your home, this is now a great time to make that decision.