Mortgage Rates Unchanged

Mortgage rates were unchanged to slightly higher today, though that depends largely on the individual strategies of the lender in question.   What we had was another narrow trading range today. The 10yr tried somewhat to move to 1.86% but once again failed.  By the end of the day, it remained unchanged from yesterday with MBS prices also about unchanged. This afternoon the Fed released the Beige Book, Fed staffers saw moderate to modest improvement in eight of the 12 districts but had to look hard to find much. The strong dollar, falling oil prices and harsh winter weather slowed activity in some sectors, according to the Federal Reserve’s latest survey of regional economic conditions, as the report covered mid-February through the end of March. Is the glass half empty or half full? The Fed wants to increase interest rates but recent data indicates continued weakness in the outlook.  I still hold the Fed will not move this year. The Beige Book is painted in a little bit more color. “Many districts noted that savings from lower energy prices are helping to drive retail sales this cycle, as is the improving weather situation,” the report said. Not sure how the staff came up with that quote -  retail sales had declined for three consecutive months until yesterday when sales were reported up 0.9%, still did not meet the forecasts of +1.1%.

Tomorrow weekly jobless claims are expected to be about unchanged from last week at 280K. The elephant is March housing starts and permits.  Estimates are set very high for starts.  The huge expected increase a result of poor weather last winter. Winter comes each year and recent winters have been worse than long term averages. However, the bar has been set high - could well be a volatile morning is starts are lower. Later in the morning will have the April Philly Fed business index, a more inclusive report than the Empire State this morning. 

Nothing has changed, but the spring is tightening, and it will not last much longer before the 10yr note makes a break out of the tight range it has been tied to since March 18th. 99% of the trading since March 27th has trapped the note between 1.98% and 1.86%.  Debates about everything these days - oil prices, the dollar, the Fed, the IMF with a coming meeting this weekend, China’s economy, good or bad?, ECB and EU events - and the list goes on. The bond market evenly balanced now as is the MBS market. This will pass and when the balance tips expect a rapid move.  The 10yr will run to 2.15% in a few days if the 10yr breaks above 2.02% OR drop to 1.70% if 1.86% gives up.  Just keep in touch with myself if you want the most up-to-date information.

In summary, much like yesterday, the benchmark 10yr note tried to move lower following weak economic data but ran into the same resistance that has held for the last few months.  Since we are at the bottom of our range, I will continue to favor locking all loans within 30 days of closing.