Mortgage Rates Moving from 2017 Lows

Mortgage rates are not moving in the direction we like to see to begin this week after seeing the rates hit their lows for 2017 just a few weeks ago.   The French election went as widely expected, as Le Pen got beaten badly, so France will not be in danger of leaving the EU. There are no data points today. Overall not any market-driving news over the weekend or this morning in Europe.

This is week is another back loaded week, but we have some very heady economic reports that will hit. Of note is Thursday and Friday's Inflationary data with PPI and CPI. CPI has been over 2% YOY the last couple of readings, and this will be watched closely. Retail Sales will be the biggest report.

After last week's seemingly hawkish FOMC policy and Friday's jobs data, the bond market will play close attention to their collective commentary this week from all the Fed officials that will be out in force this week.  You know what my feelings are about what they say, as it is to draw attention to them and cause a lot of havoc in the markets.

Now that the French Election is over, the markets are focusing on if President Macron can get a cabinet together and who will be the Prime Minister. Great Brittan will have an important BofE meeting. They will be the first Central Bank to be able to make policy without being forced to be on hold pending the French election and the future of Europe.

WTI Oil prices will also need to be closely watched as they have been providing terrific support for our pricing and Russia/Saudi Arabia are doing their best to prop up pricing this week.

Friday’s US employment report was generally strong, with job growth of 211,000, declining unemployment and a drop in the number of workers involuntarily confined to part-time work. Unrelated to the new administration stocks have strengthened, particularly as strong earnings reports for the first quarter have come in, growth abroad has strengthened and bond yields have declined. Meanwhile, the Fed is still being twisted; if the Fed increases rates and the economy doesn’t meet that 4.0% yr./yr. growth it may find the hike(s) contribute to a new recession. Not forecasting a low but that is what the Fed faces now. The ECB, while Europe’s economies are gaining momentum has yet to even consider backing off QEs and increasing rates. Markets, however, are holding to the view the ECB will follow the Fed with tightening.

Now that the French election is over and it went as expected, look for a pullback in the MBS market (higher rates). We're not looking for anything too dramatic given the significant amount of support we have in the MBS market.