Mortgage Rates Not Moving

Mortgage rates did not move much as we had another quiet day ahead of the FOMC policy statement on Wednesday. Here come all central banks adding more QEs and cutting rates, so far the ECB has only said it was thinking about it but China and other lesser central banks are trying to prop up their economies, and that is nanna to US stock investors. The Fed is not even sniffing an increase, although no matter how it is cast in concrete we have to suffer those Fed officials that are still on a rate increase idea. The US and global economies are slow and slowing in Asia and emerging markets. There was a time not too long ago (1 yr) when the view was that if emerging markets slowed and China’s growth weakened, it would feed into the US. Well that is not a convenient outlook now as global markets slow and inflation is nowhere in the world. Now it’s, the US doesn’t need Asia and emerging markets, we can stand on our own.

Several economic reports today were on the negative side, especially those on the housing front after positive reports last week. Tomorrow we will have September durable goods orders, the August Case/Shiller home price index, and then the Conference Board reports its consumer confidence index.

So far this month the bellwether 10yr note and MBS prices have been in very tight ranges. The 10yr trading between 2.10% and 2.00% since the beginning of October.  Mortgage rates are essentially unchanged. Equity prices increasing yet safe haven treasuries are not moving higher. It is just a matter of time before the 2.00% level on the 10yr note blows lower in yield – I have no idea when, but as long as money managers and investors ignore economic and earnings there seems to be no end to how high the stock indexes will climb. Do not dismiss though that interest rates are hanging tough now.

In summary, it was a sedate Monday in rate markets today, as both MBS and treasuries traded in narrow ranges.  Wednesday's Fed Situation Report will hold traders' attention, as always, but more for their economic outlook than an actual rate hike announcement, which is highly improbable. The more times we hear "the Fed is going to raise rates!" without that happening, the less markets seem to pay attention to the predictions.  Currently, if the rate is there, grab it as the idea of it going lower certainly could happen, but the likelihood is very weak.