Mortgage Rates Seem to be Waiting for Tomorrow's News

Mortgage rates finally did not move too much, despite the improvements we saw in the mortgage bond markets.  Usually any movement up or down as we saw today would have a direct correlation on where the mortgage rates would move.  So you ask why no movement today?  I gather there must be too much anxiety within the markets that most banks want to wait until tomorrow to see what transpires at 1:00PM when the FOMC ends their meetings.

Even with the volatility we had yesterday, and really for the past few trading sessions, , it has been quiet with stock indexes holding out-sized gains and interest rates, although higher, are still hanging in there not making new highs (along with the 10yr0, and showing little concern over the geo-political  turmoil in Europe. This is rather spooky. How much longer? Tomorrow? Not just the Fed this week but meetings of central bankers (Japan, England, Swiss central bank) and starting Friday G-20 finance ministers will gather over the weekend.

Plenty happening globally, as the Netherlands are voting today with rumbling about leaving the EU. French elections getting closer but over the polls and rhetoric markets are dismissing the potential of Maine Le Pen winning in the second round in May; she wants to leave the EU and the euro currency, the UK about to invoke article 50 of the EU charter and start the process of leaving. Markets have no outward interest in the increasing tensions between the US, China and N Korea. It is onward and upward potential hurdles be damned.

Tomorrow we have a lot to work through.  Even though the FOMC and Yellen’s press conference is the headliner, we will get key data points in the morning, such as February CPI and Retail Sales, March Empire State manufacturing index and HAHB housing market index, January business inventories, along with Weekly crude oil inventories.

Even with these key data points in the morning, I doubt there will be much reaction to them with FOMC tomorrow afternoon. It is not the rate increase, as we have reminded, it is how markets interpret the policy statement and Janet Yellen’s press conference after the meeting (1:30PM). Also tomorrow afternoon the Fed will release its quarterly forecasts for GDP, inflation and interest rates going out two years. Not too interested in what the Fed believes for 2019 but want to see what the Fed thinks the remainder of this year and into 2018.  

In summary, mortgage bonds bounced back (slightly) today, as investors awaited tomorrow's Fed announcement.  It is a virtual certainty they will raise the overnight rate - the bigger questions are the projected path for future increases and economic growth estimates.  With rates losing ground steadily for several weeks, it is tough for me to get excited about floating here.  Yes, we may be nearing the top of our new rate range, but until I see more evidence of that, I will continue to recommend locking early.