Mortgage Rates Sideways Before Markets Closing Early Today

Mortgage rates are moving sideways so far today, after a large improve we have seen in the past two days.  Late yesterday afternoon, we had a lot of volatility when President Trump commented he wanted a weaker dollar and possibly would re-appoint Janet Yellen when her term expires next year. Normally not comments that would elicit that kind of movement but this week trading is very thin. Not always the case, but this year Holy Week and Passover are happening simultaneously leading to less participants in the markets, whether bonds or stocks.

From the economic reports this morning, there looks to be no inflation according to the Purchase Price Index readings for March. The headline reading fell and the Core PPI monthly reading came in lower than anticipated.  The Core YOY reading did increase from February's pace, but it is below forecasts of 1.8%. Tomorrow's Core CPI reading commands more attention, but the bond market will be closed.

Initial Weekly Jobless Claims were lower (better) than expected. With the more closely watched 4-week moving average fell from 250,250 down to 247,250.

The Preliminary April UofM (Consumer Sentiment) reading was much stronger than expected, a solid reading but not a major factor for mortgage rates.

Looking at the bond and mortgage market from a technical view, I have written numerous times that if (when) the 10yr broke its 4-month hard resistance at 2.32/2.30% level it would drive MBS prices higher and the 10yr yield down quickly because markets had been betting on interest rates increasing, some of those bearish positions were blown out yesterday. The next technical resistance for the 10yr note is 2.20% that goes back to the Trump victory in November.

The surprising rally yesterday afternoon may keep interest rate markets quiet today - it was one of those knee jerks we talk about when emotions overtake markets. This morning at 11:00AM, MBS prices are slightly lower, with the 10yr at 2.25%. The markets will be closed tomorrow and trading volume in all markets is very thin. Trump’s comments yesterday about a weaker dollar are overdone, the dollar is not heating up, not sure what he tried to accomplish, if anything. The dollar is substantially weaker now than at the end of last year. The fear of Russia/US deteriorating relations should be couched in a little patience. The North Korea/China/US relationships are tense but in the end China will step on North Korea to quiet its current belligerent tone.

Headed into the long weekend and markets closing early today, and even with CPI coming out tomorrow, I do not expect mortgage rates to make a big move after yesterday’s drop.