Mortgage Rates See No Change

Mortgage rates did not move much today.  However, we are seeing the bond markets that underlie mortgage rates remain under pressure after last week's Fed Minutes showed widespread support for a Fed rate hike in June or July.  Since then, several Fed speakers have echoed the sentiment in no unspecific terms. Some are waiting to hear what Yellen states in her speech to the college graduates on Friday.

This afternoon Treasury sold $34B of 5yr notes.  The auction, like yesterday’s 2yr note, saw the demand was exceptionally strong. The demand for US treasuries is amazing but the two strong auctions have not moved the treasury market. Tomorrow Treasury will sell $28B of 7yr notes.  If yesterday’s and today’s auctions are any indication the demand is likely to be very strong also. Hard to draw much from the strong demand but surely indicates investors want US treasuries.

The technical readings on the models and all of the momentum oscillators remain bearish - the only light is that the 10yr note yield is holding its 100 day average going back to mid-January.  MBSs are feeling a little pressure.  Tomorrow weekly claims expected at 275K down 3K. April durable goods orders, a key data, and more housing data.  Housing was considered somewhat a dragging sector but recent information clearly shows big improvements.

Will the Fed move next month or wait?  Markets are not fully gathered around a June move but July at this time based on recent economic reports is likely. Janet Yellen will talk on Friday afternoon, her comments may clear the air if that is possible at the Fed. This recent stock market rally was unexpected and I do not believe it will last - most traders approaching it with questionable concerns. The bond market holding firm also uncertain as to why the equity markets are improving.

In summary, I am watching the 10yr yield and generally favor floating, but right now I do not see any benefits.  I am not too optimistic about major improvements unless we can break through the lower end of the range we seem to have been stuck in for quite some time now. In either case, the next move would likely be big, so I might be on the side of caution, but with rates this low, why not let go of the risk that is still out there.