Mortgage Rates Trending Sideways

Mortgage rates are trending sideways this morning.  Last week, with the volatility from the poor economic news and the meeting of the FOMC, the rates did not move much last week.  Thus far, the mortgage bonds have opened a little weaker this morning, but no big deal. There are no economic reports today and little this week, except May existing and new home sales. Recent data in the real estate sector has not been the best recently.

There has been very little movement in the bond and mortgage markets over the last week. All technical aspects remain slightly bullish for rates. Fundamentally, a mixed bag as the US economy, while not slowing, is not improving as had been widely expected at the beginning of the year.

The DJIA and the other indexes are gaining momentum and the DJIA at new highs. I normally stay away from longer term forecasts, especially in the equity markets. That said, most are expecting that the DJIA will continue to improve, looking for the top at 23,000 - before a very sharp decline.

As I mentioned, mortgage rates and prices are locked in a narrow range. One big key is the dollar. If the dollar begins another run lower, that would support better treasury prices and push MBS prices higher. If the dollar weakens, it will remove the incentive of foreign buying that has been one of the building blocks for the lower rates. Inflation is not a worry, other than the fact that now the Fed is worrying its 2.0% target may be too low. We had a lot of choppiness last week (62BPS swing from our highs to our lows) but in the end, MBS just moved sideways. This week, look for MBS to move sideways once again but without the choppiness. (flat mortgage rates).