Mortgage Rates Giving Everyone Fits

Mortgage rates are doing everything in their power to give everyone who follows and quotes them to their customers nothing but fits.  And it really is not the mortgage rates per se, but all the surrounding hoopla that has become the volatility that surrounds this market.

The WSJ has yet another poll on the FOMC next week. How many have you seen in the last month?  How many times have I written about the same hog wash and really have not given you any satisfaction on what might just happen.  You have heard September, and even December, and let’s just get it over with – and even my prediction that it will not occur at all until 2016.  This article finally had my prediction (of which I have held fast to since March (check out my previous articles) and that was at a 9.5% chance that it would not happen until then.

Nothing of consequence this week in terms of economic reports, everyone waiting for the Fed next Thursday. Next week there are number of data points, unlike this week. Nothing on Monday, but on Tuesday August retail sales, Sept Empire State manufacturing index, August industrial production and capacity utilization. Wednesday August CPI. Thursday the FOMC of course and Yellen’s press conference, August housing starts and permits. Friday August leading economic indicators.

Not likely markets will move much next week until Thursday afternoon, and even then we do not believe much movement in stocks or bonds on the FOMC policy statement and Yellen’s press conference. This has been one of the sagas of uncertainty marked with many opinions, I am sick and tired of having to write about the Fed in the last six weeks. What we expect Thursday is initial volatility then markets will settle with little change from where markets open on Monday morning. Scrape the barnacles off the haul then we get back to sailing along on a moon lit bay. Another way to frame it - sell the rumor, buy the fact.

There was some price improvement in MBSs and treasuries today, mostly just squaring for the weekend. As noted above, no movement to speak of in MBS prices or treasury rates (10yr note).

In summary, the narrow range for rates continue.   The 10 year yield has so far been well contained at the 2.20-2.22% level.  Should these levels be violated we will be in trouble should they continue to hold we could see rates improve.   The market is at a tipping point and the Fed meeting next week will hold the needed weight to see which way things will tip.