Mortgage Rates Best Day of the Month

Mortgage rates had their best day of the month today following Fed Chair Yellen's testimony before the Senate Banking Committee.  In her prepared text she tried to set up markets for a rate increase (as if that is necessary since that is number Uno on everyone’s list).  She discussed the use of the word “patient” used in the FOMC policy statement and when it may change - what markets call “guidance”, what I call Fed speak - a language most cannot understand with any clarity even though not many want to admit it. A shift in guidance would signal the economy has improved to the point where an increase “could be warranted at any meeting,” while not necessarily committing policy makers to a rate increase on a specific timetable. After hearing from Yellen today, trading levels went back to suggesting a September rate hike.

Technically now, the 10 is sitting on its 20 and 40 day averages after moving above each in the last two weeks. The 14 day RSI, our key momentum oscillator (because it is easier for readers than stochastics and MACDs to understand) is now neutral at 50. We normally don’t put the bond chart in the afternoon report, but today it is important from a technical perspective. To turn the bond market to slightly bullish we want another day tomorrow with better pricing.

In summary, seems the market was expecting Yellen to be much more hawkish today in her yearly testimony to Congress. The nice improvements this afternoon have erased the recent increases in rates the last six sessions.  The benchmark 10yr note managed to bust through 2.04 which was solid resistance for the past few weeks. With the 10yr well below resistance, I would recommend to continue to float to see if these gains can be added to tomorrow.