Mortgage Rates Back in Tight Range

Mortgage rates are again back in the same range that has dominated the past 45 days.  Where we go from here may well be dictated by the economic reports coming out during the remainder of the week.  In that regard, Friday has the biggest potential for drama, thanks to the important NFP Report.  But many view tomorrow morning's ADP data as an early indicator of Friday's jobs report.  As such, potential volatility will be increasing from here.

We have seen some surprising data reports in the past few weeks, such as the August consumer confidence index coming in a lot better than anticipated, but very little reaction from the markets.  After the knee-jerk reaction to Yellen’s speech last week, the market has not reacted to other news that has come out.

It has been all about the Fed and it is sticking in my throat to constantly refer to the Fed. The Fed and other central banks have to hold the world up, and overall doing a good job but running out of ammo. Yellen wants another rate increase to provide a cushion if the US economy were to succumb to recession, without it then the Fed would have to move to negative rates as many countries have done with varying results. Governments have been unable to employ fiscal support so it’s all about central banks. How this will all end is not being thought about now - there is not much else that can be employed. Frustrating at times but there is no other course. Economists swimming in deep uncharted waters, stock markets supported by central banks and comments from US Fed officials like Stanley Fischer yesterday admitting central banks are supporting equity markets.  The old normal market forces have disappeared since 2008.

There has been no change in the work models as every technical indicator used is neutral. Not really a surprise but confirms what markets are doing, not what people are saying. Hard to find a stock market bear these days but that market too flat lined since the beginning of August. September is a big month - OPEC meeting, the FOMC, the ECB and the Bank of Japan. September historically a soft month for equity markets. Not to ignore, we have the elections and the beginning of the debates in a few weeks.

In summary, a pretty quiet day in bond markets.  The big question is whether that continues.  Wednesday marks ADP's August jobs growth estimate, followed by Friday's NFP report.  If those two deviate from expectations, they could provide the spark to move rates from their current tight range.  I still favor locking loans within 15-30 days of closing, pricing is great now, as I do not see that much potential for significant short term gains.