Mortgage Rates Shifted - FED Minutes Revealed

Mortgage rates shifted a bit today as the Mortgage backed Securities did a flip flop over last night’s movement and it’s morning open today.  The stock market opened weaker, then rallied, then declined and finally ended the day lower. The 10 yr note and MBS markets followed along, moving back and forth as the key stock indexes swung around. By the end of the day mortgage prices were hit hard and the 10 yr yield that this morning traded down to 2.68% is ending at 2.73%.  The reason -  a comment that the Fed may have to begin increasing interest rates sooner than earlier predicted.   Like a cat on a hot fry pan, traders are jumpy these days as are stock investors. Any talk about increasing the Fed Funds rate will send stocks down and interest rates up.   4.375% remains the most prevalently quoted 30yr fixed rate for the very best borrower scenarios though the weakness means 4.5% isn't far off.

Are you enjoying the roller coaster ride?   What we saw as a positive yesterday was wiped out by the same amount today.  This roller coaster ride has seen two major shifts so far this year - a bigger move toward lower rates during January and a smaller move back in the other direction through the middle of last week.

The forks in the road have been set and any time we head one direction, it pulls the market back and says to wait.  Optimists could say that today's weakness clearly doesn't make a case for another move higher being underway, and that would be justified.  Pessimists could say they were hoping that the past few days of strength signified the start of a more positive trend--one that's now potentially defeated by today's weakness. But was the reality?  No one can predict what is going on and that is the problem.  This confusion could persist until we have a chance to see how the economy is faring in the absence of any uncommonly cold/snowy winter weather.   I had to mention this as it seems now the biggest mover and shaker!

In summary, what looked like another positive day turned negative after the FED minutes were released. Some new insight was to raise short term rates sooner rather than later. This is the second part of the accommodation puzzle which includes buying bonds and keeping short term rates low for an extended period. The bond buying is being tapered and will end this year most likely. Raising rates hasn't even been on the radar to my knowledge, but popped up today. We'll see what happens but the economy has some headwinds to deal with. Rates could dip with another week employment report unless of course weather is to blame yet again.   I would definitely lock today if within 30 days of closing.   Longer term, I would cautiously float to see if the data continues to disappoint but this is a risk.

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