Mortgage Rates Up A Little Bit More

Mortgage rates continued to go higher just a little today as there was some more volatility both in the bond and MBS markets going into the FOMC minutes this afternoon at 1:00 pm. The minutes confirmed what markets were well aware of, that the Fed is not sure what to do. Uncertainty about inflation, about domestic and global growth set up discussions. The overriding question, are the risks to the economic outlook too uncertain to carry out the Fed plans to increase interest rates four times this year as the FOMC was “sure” of at the December  meeting. January was an extremely volatile month with stocks falling almost daily and interest rates fell rapidly moving to safety. January was a month that twisted everyone’s’ forecasts and outlooks. The Fed used the word “uncertain” or “uncertainty” 14 times in the minutes. It used the phrase “downside risk” five times and “downside” seven times, compared with two times for upside.

Oil prices fell, the 10yr Treasury is now at 1.82%.  MBS rode the roller coaster and settled 17BPS lower than yesterday’s close. Until equity markets collapsed markets were expecting another increase in the FF rate at the March 15 and 16 FOMC meeting. Last week Janet Yellen actually mentioned going to negative interest rates at the height of the turmoil in markets.

This retracements in stocks and bonds was discussed last week and now is in full swing. The DJIA is up 793 since last Friday, while the 10yr has increased from its low at 1.60%.  Unfortunately, mortgage rates have followed going up.

From the beginning of the year US and global financial markets have been exceptionally volatile, and this volatility will continue for quite a while. Uncertainty is a global infection now - for investors and central banks. My overall outlook remains unchanged, as I hold US stock indexes have a lot more selling to overcome this year – and this path will be a wild ride as I keep stating in the reports.

In summary, the market is in a volatile roller coaster.  Do you like rolling the dice?  The 10yr is at a key level, and if it breaks above 1.85%, we could see rates go up a bit more.  I do not think so as I feel that this will subside a bit, and like gas prices, go back down ever so slowly.