Mortgage Rates SIdeways with Too Much Volatility Ahead

Mortgage rates are moving sideways today after the slight downturn in MBSs yesterday and opening up the same way this morning.  The 10yr at 11:00AM is at 2.20%, off from the low yields we have seen in the past few days which has turned the rates upward by a tad.

ALL DAY TODAY we will hear the Comey testimony, and in the UK the election - but no results yet, although May is expected to win, the only concern is the margin as the UK enters the process of leaving the EU.

Weekly jobless claims this morning missed expectations as they were up and the revisions were increased bringing the four-week average to 242K.  Claims remain low and I have noted this several times, this does not get much of traders’ attention these days.

The ECB meeting today left interest rates unchanged and the QEs will continue through the end of the year. The euro-zone economies have strengthened but inflation remains very weak. The markets focused on a slight but important change in forward guidance as the ECB policy statement said "The Governing Council expects the key ECB interest rates to remain at their present or lower levels for an extended period of time, and well past the horizon of the net asset purchases." which is a more "hawkish" tone than their prior policy statement by removing the term "or lower".  But, they also said that their interest rates would stay at current or lower levels even after their QE (bond purchase program) ends. They stated that their QE program should end in December but could easily move past December if needed.

Today is all about Comey’s testimony – as this is being dubbed by some as the Super Bowl of Washington. If the eventual outcome of his testimony and other potential evidence suggests an obstruction of justice occurred then impeachment proceedings may develop. Presently most doubt that will occur but I am not betting on either outcome. Any impeachment talk is not likely to sit well with US or global markets. The odds of impeachment seem exceptionally high with Republicans holding the House. Many rocks still unturned but impeachment seems more a media post than any of fundamental significance – and today may change lots of minds.

Regardless of the Comey testimony outcome, the issue has, and will continue to be a drag on those Trump campaign promises of lower taxes, healthcare and any fiscal increases in spending. Stocks here and globally have been boosted on those forecasts and expectations and now those initiatives are going to be delayed and increasingly more likely not to happen this year.

Next week the FOMC meeting and the policy statement, the quarterly 2yr outlooks on inflation and GDP growth and Janet Yellen’s press conference. With commodity prices declining lead by crude oil the inflation outlook of 2.0% is less likely.  Two more rate increases from the Fed that were expected, but I do not see that happening now.  The big question remains is what will Yellen and the policy statement have to say?

With Comey's testimony today and the comments out of the ECB, I can see increased mortgage rate volatility.  Thus, I am being cautious and suggesting to Lock if you are going to close in the next 30 days.