Mortgage Rates Down a Fraction

Mortgage rates results were fractionally better today in the bond and mortgage markets, but not much ahead of the FOMC policy statement tomorrow afternoon. There is not going to be a rate increase but the way the FOMC statement frames the economic outlook domestic and global will be what traders and investors want to see. The thing is, the Fed has found a way to say nothing in five paragraphs and more interesting, the Fed still has talked about concerns with inflation.

Once the FOMC is out of the way look for markets to turn its optimism to the coming holiday shopping, already being hyped. This morning’s decline in consumer confidence will be swept under the carpet. Most negative economic reports are quickly dismissed as anomalies or belief whatever the data is will be revised better ‘next month’. This did not happen today with September durable goods orders that saw downward revisions in August.  

There are no data points tomorrow, but Treasury will auction $35B of 5yr notes at Noon, an hour prior to the FOMC.  

I have commented previously about the confusion and apparent disarray at the Fed. Yellen must get that under control; at each of the last three FOMC meetings and after the meetings markets came away not sure what the Fed thinks. Fed regional presidents seem on their own path while the Washington headquarters appear many times to be on another path. The resulting confusion roils markets, confuses investors and opens the door wide for the media to climb all over them with a parade of ‘experts’ opining what the Fed really means.

Although some improvement today, it was minor and stocks hardly moved. A normal condition ahead of a FOMC meeting. The 10yr still holding above 2.00%, it will as long as the Fed and other central banks continue to support markets with free money and equity markets continue to swallow the hook. The technical models went bullish on 9/17 and still hold but the only positive is that interest rates have not increased.

In summary, mortgage rates and pricing have been moving within a fairly narrow range for pretty much all of October.  It could be markets are simply waiting to hear from the Fed and get some indication of direction from them.  Tomorrow we hear from the Fed and it always has the potential for fireworks although I do not expect any tomorrow. A change in language from the Fed could spark sharp movement nonetheless so I would be locking here as any Fed meeting for the next 6 months could be market moving in a big way.