Mortgage Rates Are Flat Again

Interest rates, regardless of the daily news, are quiet. No matter what the domestic, geo-political news or central banks there has been essentially no change in long term interest rates for almost a month. The only thing I have accomplished is to keep you all up to date that the news is the same. 

Friday the 10yr dropped 4BPS, today up 4BPS as the note is flat-lined. MBS price movement was flat on Friday, today prices slightly weaker. Fast money is moving from one place to another looking for yield. Central banks are printing computer money as fast as they can to grab as much global business as possible and in the case of the EU to keep the Union from breaking apart. For all of the ink and media coverage, and all of the pundits trying to make some trading sense out of it, it is clear there is no consensus and no confidence in most all of the headlines and their interpretations. The result, no movements in US interest rates or in US equity markets based on the key indexes.

The Federal Reserve is universally thought to begin raising interest rates. Comments from the cadre of Fed officials speaking in the last three months have made it as clear as they can that the next move will be to tighten the FF rate from 0.0% to likely 0.25%. Where the clarity meets the mud, is when will the Fed move. There are a number of analysts and economists that are pushing the lift-off farther out the calendar and more and more conjecturing the Fed will not be able to move until next year. All we have to do is ignore the comments - Yellen and most of the FOMC remain data dependent as a time frame for moving. So far this year most all economic reports have not met expectations, investors and the Fed think April data that will begin to unfold in a couple of weeks will confirm the economy was weakened by weather, look out though if the data continues to be soft, the stock market is set up for a huge decline and interest rates are ready to drop substantially. There is always a fly around the ointment, inflation is edging higher, a strong incentive for the Fed to move.

In conclusion, markets have been driven by foreign news in the last few sessions. I still believe the economy is weak enough to keep the Fed at bay and that US long term rates will decline from present levels. Timing is difficult as it depends on incoming news that unfolds from any and every direction. The housing market will be the key for US data this week with existing and new home sales Wednesday and Thursday.  In retrospect floating loans the last couple of weeks would not have caused any losses - although I expect resistance levels will be taken out, I cannot completely discount a decline in prices before a rally breaks resistance.