Mortgage Rates Unchanged Again Today

Mortgage rates were unchanged again today, and really have not moved much in the past 10 days.  They market has been in a very tight range, which makes it scary to me if people want to continue to float past 15 days.  This really speaks volumes to the indecision in financial markets ahead of this week's major central bank announcements.  That is where the Fed and the Bank of Japan give the official word on their monetary policy, which includes setting short term rates and spelling out various stimulus efforts. 

Treasury held a $26B auction this afternoon and no one showed up!  It was a very nasty and weak auction. Who wants a 2yr when there is suspicion that the Fed will increase rates this year?  The FOMC starts tomorrow. Even those that think the Fed will increase rates by the end of the year are not sure; it has been almost a year that the Fed at every FOMC meeting has hinted of a rate increase. It did once in December and literally told markets there would be four to six more increases this year. Now if there is one it is still a guess both within and without the Fed. What the Fed has done in the place of more increases has been to continually revise lower its economic outlook.  The stock market backed off a little today as the time grows short. No meaningful change in the 10yr today, and MBS prices slightly lower.

Tomorrow housing data and consumer confidence for July, the MAY Case/Shiller housing price index for the largest 20 cities, and the more important report, June new home sales. Also tomorrow Treasury will sell $34B of 5yr notes, but the demand and bidding should be better but still likely to be anemic.

Crude oil prices are falling from $50.00 earlier this year, now closing on $43.00 and likely will drop further. Oil producers that shut down the pumps when the price dropped to $20.00 are starting them up once again. And there are new reports that maybe there is more oil stored than what was thought.

In summary, it is very unlikely interest rate markets will improve tomorrow ahead of Wednesday’s policy statement. If there is any significant price change it will be to lower prices. In the end though we are not expecting any major changes in yields or prices of MBSs. Rates might finally get some motivation to move this week. For about the last 2 weeks, it seems traders are waiting on something and that something might just be the FOMC announcement on Wednesday. I would not be surprised to see us challenge the top of the range between now and then. That said, I do not see much to be gained from floating, so locking is the safe call for now.