Mortgage Rates Flat Today

Mortgage rates were mostly flat today, which what was happening in the stock markets all over the globe and here in the US, that is an accomplishment! 

Crude increased today with new contracts for February leading the short-covering.  With this news, the stock market improved as the market again was extremely volatile.  I mentioned yesterday that stocks and crude had reached near term technical oversold levels and a correction was likely to make some sort of a comeback.  At one point, they were up significantly, but backed off by the close.  Interest rates edged a little higher as the 10yr closed above 2 (2.03%) and MBS prices slipped.

This morning’s two data points were not encouraging as weekly claims were higher than anticipated.  Even though the January Philly Fed business index a little better than expected, the revision for December wiped out that news quickly.

Mario Draghi this morning telling the world the ECB will do whatever it takes to prop up Europe and to get inflation moving higher. He commented that inflation was slow and will take a lot more time than he had expected. Central banks still confused- no inflation is anywhere on the horizon, likely nothing this year. Nevertheless his remarks and higher crude oil today gave markets a boost for a few minutes.

Tomorrow December existing home sales will come out. Next week its FOMC week on Tuesday and Wednesday.  There will be no rate increase but the policy statement, always important, this time will carry extra significance after the stock market drop since the beginning of the year. The Fed’s credibility to forecast economic growth is poor, the Fed doing that tilting at windmill thing for the last 18 months. The Fed wants to “normalize” in a very abnormal picture. Believing 5.0% unemployment is the keystone with little outward concern that many of the jobs created in the last three years do not come close to a living wage. Do not expect anything to change in the Fed’s rosy comments, fortunately the Fed is becoming more irrelevant to markets.

In summary, with crude and stocks oversold we are expecting more improvement in both markets tomorrow or early next week. Markets should rebound some and interest rate prices decline from present levels. The wider look though remains bullish for interest rates and very bearish for US and global equity markets.  I may be putting my foot in my mouth by saying this but I do not see rates improving further in the next 15 days.  Longer term I do see rates improving but if you are closing in 15 days or less lock in and take all risk off the table.