Mortgage Rates Not Moving

It would not have taken much for mortgage rates to outdo themselves in terms of volatility when compared to the past few business days.  Last Thursday and Friday were particularly uneventful.  Yet somehow, today managed to be even more so.  I just hope we are not getting into a pattern that we will be caught off our guard in regards to where the rates will eventually head.

There was a guest on CNBC this afternoon saying the consumer is becoming more willing to spend. He said wages are increasing and discretionary spending is about to increase. He said the consumer is in good shape. If that makes sense to you then you have to believe the Fed will increase the FF rate this year and interest rates are about to increase substantially. There is not any substantive evidence that his remarks are on target. More surveys out today on when the Fed will make its move.  The interest rate futures market pins the estimated liftoff date after the March 2016 meeting. 

This week shows much of the domestic data is all about housing. This morning the NAHB housing market index increased three points, close to a 10 year high. Tomorrow morning September starts and permits, with the headline will include multi-family, look more to the starts and permits on single family units.  Not much US data this week, traders will turn to global central banks. The headline is the ECB meeting on Thursday with Mario Draghi’s press conference to follow.

The 10yr note yield currently is finding hard resistance at 2.00%. Until that level is violated I am unwilling to float or take a long position in the bond or mortgage markets. The work is still bullish but the current near term risk is not a reasonable on the take now. The ECB meeting on Thursday and the FOMC meeting next week are going to keep short term improvements at bay now.

In summary, mortgage bonds improved a bit today.  It looks to me we are moving sideways with no clear signal as to what the next move will be.  I do feel in the near term pricing could get worse before it gets better.  I would be locking if you are closing in under 15 days.