Mortgage Rates Moved Slightly Upward

Mortgage rates moved slightly higher today, erasing a small bit of the massive movement we saw on Friday.  The biggest surprise was to see that there was not much change from the morning’s levels after Yellen’s speech this afternoon.  She never flinched on her desire to increase rates but did remark she is still concerned about the global economic outlook and slowing in some of the sectors ion the US. She said she remains data dependent, and that inflation is on track for her 2% goal. There was little reaction to her remarks, commented that the May employment report did not overlay her concern although she was somewhat surprised.

After her second speech this afternoon, she commented… “Although the economy recently has been affected by a mix of countervailing forces, I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones. Although this recent labor market report was, on balance, concerning, let me emphasize that one should never attach too much significance to any single monthly report. Other timely indicators from the labor market have been more positive. For example, the number of people filing new claims for unemployment insurance--which can be a good early indicator of changes in labor market conditions--remains quite low, and the public's perceptions of the health of the labor market, as reported in various consumer surveys, remain positive. That said, the monthly labor market report is an important economic indicator, and so we will need to watch labor market developments carefully.”  She also said that as the disinflationary effects of the strong dollar and cheaper oil dissipate, she expects inflation to move back to 2%.

Tomorrow the Treasury will auction $$34B of 3yr notes.  Prior to that at 7:30 Q1 productivity and unit labor costs.   Later, at 2:00 April consumer credit will come out. 

In summary, rate markets pondered Friday's dismal jobs report today, but stayed within recent ranges.  Bond traders are apparently willing to wait until next week's Fed statement before committing to lower rates.  There's no chance of Fed raising their overnight rate during June's meeting, the focus will be on their language and economic forecasts.  Since we seem unlikely to move much lower until next week, floating borrowers have a choice:  take the gains and do not look back, or continue to wait in hopes the Fed Statement is bearish enough to jar yields lower.  In my mind, it's 50/50 lock/float now, but for those closing soon, why not lock them up and move on?