Mortgage Rates Shows A Little Improvement
Mortgage
rates improved
a little bit today despite stronger-than-expected economic data. When economic
reports are better than forecast, rates tend to move higher, but geopolitical
tensions are currently weighing on markets to some extent, especially since
last Thursday. The most prevalently quoted conforming 30yr fixed rate for
best-case scenarios remains 4.25%-4.375%.
About what we expected today, not much change in stocks of bonds with the FOMC meeting tomorrow and Wednesday. Wednesday afternoon will provide fresh fodder to think about when the FOMC policy statement, Janet Yellen’s press conference and the Fed’s quarterly forecast for inflation and its estimate for GDP growth in the US are released. It is the same at every FOMC meeting - a lot of chatter and forecasts about what will be said. One thing, the Fed will taper another $10B form its monthly purchases of treasuries and MBSs. It is not likely to have any impact on the markets as it is almost completely discounted in present price levels and with housing weak the lack of $5B a month in MBS purchases should not present any major problems for the MBS markets.
About what we expected today, not much change in stocks of bonds with the FOMC meeting tomorrow and Wednesday. Wednesday afternoon will provide fresh fodder to think about when the FOMC policy statement, Janet Yellen’s press conference and the Fed’s quarterly forecast for inflation and its estimate for GDP growth in the US are released. It is the same at every FOMC meeting - a lot of chatter and forecasts about what will be said. One thing, the Fed will taper another $10B form its monthly purchases of treasuries and MBSs. It is not likely to have any impact on the markets as it is almost completely discounted in present price levels and with housing weak the lack of $5B a month in MBS purchases should not present any major problems for the MBS markets.
Not
only the Fed this week, but Iraq is increasingly drawing concern. In terms of
the economic impact, Iraq is a major exporter of oil. Any sustained increase in
the price will send gasoline prices higher. Summer time usually drives gas
prices higher with more drivers on the road. Tomorrow another two reports with
significance; May housing starts and permits and May CPI. Not so concerned
about CPI but the starts and permits are a key measurement on the housing
sector.
Most
all of our technical models are neutral; not bearish and not bullish. That
equilibrium is likely to be broken by the end of the day Wednesday. Keep your
eye on the ball (markets) not what people are saying; many are focusing on
wrong things and ignoring the price action completely. How low rates will
decline now is unclear, but we stand on our present outlook that rates are
likely to move a little lower, if rates increase it won’t be by much. We
continue to watch the stock market, it is softening and should enter a major
sell-off unless the Fed turns the world upside down.
In summary, not much movement in rates today. We have a potentially market moving event on Wednesday with the FOMC of the Federal Reserve meeting and releasing its decision on rates, QE, and forward guidance policy as well as updating economic projections for the future. While it's likely the status quo will be maintained surprises are never out of the question with these meetings so stay tuned in to events. Lock decisions should be driven by your risk tolerance with a bias towards locking in the short term.
In summary, not much movement in rates today. We have a potentially market moving event on Wednesday with the FOMC of the Federal Reserve meeting and releasing its decision on rates, QE, and forward guidance policy as well as updating economic projections for the future. While it's likely the status quo will be maintained surprises are never out of the question with these meetings so stay tuned in to events. Lock decisions should be driven by your risk tolerance with a bias towards locking in the short term.
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