Mortgage Rates Moved Higher Today

Mortgage rates moved higher today after the roller coaster started with the Feds reiterating their intentions regarding the gradual tightening of monetary policy.   We have now seen 4.25% as the most prevalent quoted conforming 30yr rate for top tier borrowers with some additional closing costs and 4.375% coming into the picture. 

It is nothing substantially different this afternoon on the FOMC statement and Yellen’s press conference. Not those markets took it quietly - MBS prices tumbled then rebounded with the 10yr note. The 10 prior to the 2:00 release was at 2.58%, it ran up to 2.61%, last Friday’s high but by 2:30 back to 2.58%. MBS prices dove 23 bps frm 9:30 levels then with the 10 jumped back to -4 bps from 9:30. The market reaction today is generally what we see each FOMC meeting; it takes an hour or so to settle down.

The Fed will lower its monthly purchases of MBSs and treasuries to $5B of MBSs and $10B of treasuries, a reduction of $10B; and the Fed will end the purchases altogether in October. That isn’t new, markets have expected that since the last FOMC meeting. The Fed will continue to re-invest pay downs and payoffs back into the market until after the first increase in the FF rate and after that no re-investing.

When it was all said and done this afternoon, the 10 yr note rate increased just one basis point to 2.62% - the range however, as usual was wide in the 30 minutes after the release, 2.55% to 2.62% before settling down; then at 3:45 more selling took the 10 back to 2.62%. MBS prices were volatile also and are going to end the day down about 14 bps in price. Now back to tracking economic data, as the FOMC pointed out the Committee will also do. Tomorrow weekly jobless claims (-10K to 305K); August housing starts and permits (starts -5.0% to 1438 mil units, permits +0.3% to 1054 mil units---both annualized); Sept Philadelphia Fed business index (23.5 from 28.0 in August), the regional report is the only regional report that includes an inflation reading.

Do not try and fade the technical - they remain bearish as we have been noting. Trying to digest the FOMC and Yellen’s press conference is like trying to digest a Foot Long in an hour. Lots of volatility trying to handicap what it all means to the interest rate markets. What the markets are saying now is that rates are going to increase. We don’t expect much increase but we have to respect what we are seeing in the price action.

In summary, the FOMC statement has come and gone. The initial knee jerk reaction was worse for rates, but once the full statement had time to sink in rates have settled in at unchanged levels on the day. All in all, the FOMC statement and presser seemed more on the dovish side, then the hawkish side. However, the Feds forecast from growth, unemployment, etc... was more hawkish but the Fed seems to always over estimate on their projections. If you floated through this report, I would continue to float.

Remember, if you want to know the benefits of locking your rate today versus floating, simply give me a call at 314-744-7806 or visit me on my website at www.CallTheMoneyMan.com. I have access to real time Wall St. data and instant market alerts with breaking news that I monitor throughout the day to assist us on making the informed decision.