Mortgage Rates Get a Sign of Relief

Mortgage rates finally were able to catch their breath today and get a sign of relief.  Today was the first day which seems like eternity that we saw any improvements of significance in the mortgage bonds and the rate market.  The minutes from the FOMC meeting were released with 37 pages of garble and little interest.

Most of the economists and analysts were thinking the Fed would signal a rate hike in June and remove the ‘patient’ word from the previous meeting. That the word stayed in rallied the bond and mortgage markets on the initial response. Looks like what I have noted previously, the Fed is not in any hurry to increase rates until the obvious surfaces that the economy is improving. There was a comment that the lower crude prices could be a determent to economic growth, the opposite of what the consensus has been.

The economic data this morning was weaker than expected. January housing starts, permits, January industrial production and factory use, January PPI dropped 0.8% against -0.5%. The Fed’s FOMC minutes did confirm that Q1 would be weaker than Q4 2014.

I am not going to bore you with the Greek tragedy, but some negotiations are going on. This is being monitored and whenever the issue begins to affect the markets, I will let you know with details - in the meantime you need not care about it. The same goes for the Ukraine/Russia mess. Where the focus is now is the Middle East that is developing into a serious crisis for the US and Israel. The entire region is being drawn in to what may turn into a huge ethnic battle that could well redraw the maps in the region. Nothing so far but we are following the developments closely, as everyone should be doing.

Tomorrow weekly jobless claims are expected downward as the weather will likely distort the report. Later we will have the February Philadelphia Fed business index and January leading economic indicators.

In summary, although the bond market got a bounce on the FOMC minutes this afternoon, the market remains bearish for the near term. As noted this morning the market for MBSs and treasuries is currently oversold, some retracement is expected. People who floated saw some benefits.  Although the near term is bearish, I am mostly concerned with the near term - the longer outlook is still bullish in my opinion. The US stock market is becoming too expensive regardless of what CNBC and its guests espouse. I will take it as it comes but I hold that interest rates are not going to increase much, and that there is the likelihood that rates will see another downturn, the unanswered question is when. With the US equity market the only place to invest for most investors the stock indexes can easily defy gravity longer than is reasonable.