Mortgage Rates Again Unchanged

Mortgage rates were unchanged again today, continuing a trend of minimal movement that has been intact for all but one day in the last month.  Rates are not much different now as they were then.  Am I beginning to sound like a broken record?

Within the near term trading range the 10yr and MBSs showed a little volatility. MBS prices started slightly lower this morning then about 10:00 selling took MBS prices down 16BPS and the 10yr ran up to 1.90% as I finished my report this morning and commented on such.   This afternoon the 10yr fell back to 1.88% and MBS prices crawled back to where it basically opened this morning.  Not a huge amount of volatility in terms of the actual changes but more confirmation that markets remain confused, selling is non-existent and buying is flat. It is not prudent to push the markets now in the tight ranges. Which way will the markets break?

Fed officials did their part today and contributed to confusion, as one Fed official dove out commenting that rates may move higher later this year.   However, the person talking was not a FOMC voter this year but still manages to stir the pot as most officials seem to do anytime they speak. One wants a rate hike sooner as another wants it later - one official believes the economy is on a nice recovery once spring takes hold. It is increasingly more annoying to sift through all the Fed remarks, taken together the take away is the Fed is afraid to move trying to jaw-bone markets.

Traders in Chicago do not buy any of the Fed’s comments. It is becoming increasingly clear the Fed is scared to death to raise rates now. Nice to have so many officials with differing opinions, keeps markets uneasy and in narrow ranges. Surveys that call for the lift-off in June are just talk.  The Fed will not move in June. As for Sept no matter what comment we have to gag down from Fed officials, a rate increase is about the incoming data, markets do not need the Fed’s “wisdom” to read the data.

Tomorrow March CPI and the University of Michigan consumer sentiment index will come out.  The biggest issue now is that crude oil is increasing and gasoline prices will increase.  Even though it may not affect the index tomorrow - but it will.

In summary, it will be nearly two full weeks until we get any data that is significant enough to justify a big move in rates.  Between now and then, it's hard to see where motivation will come from, as markets are telling us that weakness in the moderately important economic reports is not enough on its own. Today saw volatile underlying market conditions that ended up “canceling themselves out” for lack of a better term.  Bonds were weaker mid-morning, and erased the weakness in the afternoon.