Mortgage Rates In Holding Pattern

Mortgage rates are now in a bit of a holding pattern after last week’s increase which subsided last Friday.  There was very little movement today, if any, and the only change may have been in seen in regards to the fees charged for the interest rates quoted. 

Bonds markets continue to price extremely high chances of a Fed rate hike next week.  With all the positive data that was seen last week, the rhetoric that came from the various Fed speakers on the circuit, and Janet Yellen’s comments on Friday, the odds of a Fed rate hike more than doubled last week based on market metrics. 

January factory orders this morning was the only data today as it came in line with what was anticipated.  What was interesting to see was looking at core capital goods (nondefense ex-aircraft) the results turn decidedly weak, a decline for orders which points to softness ahead for related shipments. And shipments were already in contraction in January.

There is not much this week until Friday, but Treasury will sell 3s, 10s and 30s beginning tomorrow through Thursday - $56B total. The week’s main event is February employment data on Friday - the last hurdle for the Fed and the keystone to increasing the FF rate on the 15th. The only thing now that can delay the increase is a very weak employment report. The demand for Treasury supply this week ahead of Friday’s employment and the Fed’s almost certain rate increase will be get traders’ attention.

In summary, bond markets were basically flat today, which is refreshing after last week's sell-off. We are hanging near the top of recent ranges.  Could a bounce be in play to take us back to the lows or last week?  Possibly, but the payroll data due later this week and a Fed rate hike coming next week, not so sure this is much to gain.  There is limited benefit in floating here, but (at least for a day or two) it may be worth the limited risk.