Mortgage Rates Unchanged

Mortgage rates were surprisingly unchanged today, despite the potential for volatility surrounding the Fed's rate announcement.  No one expected the Fed to hike rates at this meeting, but there was a risk they could shake things up via the release of their updated forecasts or during Fed Chair Yellen's press conference.  As it turned out, there were more mixed comments but in the end there will be no rate cut in July and as I have been stating here, and maybe none whatsoever this year.

The Fed did state that the economy is improving, then at the next breath saying employment is slowing. The Fed has once again lowered its forecasts for inflation and the time table for increasing rates. Overall the policy statement was about what was to be expected – but there was a tone less positive than what the Fed has been saying this year. Interpreting the statement, by their own admission they are not going to move rates higher at the pace the Fed and Fed officials have been saying for months now. Admitting the Fed has lost it? Not really but when you study the global economy, the declining job growth and mix in the mess the ECB and BofJ have fostered trying everything to keep their economies from recession and deflation. That has not worked and each day more economists and analysts are coming to believe central banks have lost control and have run out of bullets they thought would work. 

The overall reaction sent the bellwether 10yr to its lowest yield yet this year as it closed at 1.57% - not a new low but supporting the outlook for continued low interest rates. The bond market now should stay at low levels now until the UK vote a week from tomorrow, focusing on the increasing number of polls in the UK that so far have offered different results. Presently it appears a toss-up.

After the meeting and Yellen’s press conference it did not seem that equity markets were buying into the weak outlook implied by Yellen - markets leading the Fed. The Fed has tossed in the towel now, letting markets dictate what the Fed will do, no longer the Fed leading markets. Unfortunately, I have stated that the US and global economies have little growth and will not for years. What we face in the world is a re-balancing growth and wages. Wages in the US will stay low and wages in emerging markets will improve. Interest rates will continue lower.  The path though will have a lot of chuck holes but interest rates will move lower, I some speculation that the 10yr will move to 1.25% before the end of the year, and a very severe decline in equity markets.

In summary, even with the outlook for lower rates, I still feel that there is too much volatility and that one should still monitor their own risk levels.  I am going to suggest to move forward with caution, but if these rates are attractive, lock them up and do not look back.