Mortgage Rates Moved a Little

Mortgage rates moved a little but were essentially unchanged today, despite how the MBS’s were moving today.  In other words, rates should have moved a bit higher today if they were paying strict attention to the way the Mortgage Backed Securities were trading as they usually set the tone.  However, we have seen that this could be a delay reaction as sometimes the banks decide the next day on what transpired the day before.

Currently, we are seeing more volatility in a rather tight range.  Interest rate markets continue to slide but not much by the end of the day. Even after all the reports this morning, MBSs were in the negative, but continued to slip through the morning on what only can be seen as a shot across the bow for consumer spending, as retail were very soft and way off expectations and the original release for January sales.

Outside of this, there is not too much to add as the FOMC policy statement is tomorrow at 1:00PM.  Yellen’s press conference is scheduled for 1:30PM. Along with the policy statement the Fed will release its quarterly forecasts for GDP, inflation and employment for the next two years.

There will be key economic reports tomorrow before the FOMC, starting with the February CPI, February housing starts and permits, and February industrial production and capacity utilization.  Also we will get crude oil inventories at 9:30AM.

Nothing has changed as the technicals are bearish. The FOMC meeting and the Yellen press conference is the complete focus now.  No rate increases but I now heard some are thinking and talking of a June rate increase. The performance of the economy and inflation outlooks is the complete determinant that will guide the Fed’s decision. By the time the June meeting is coming around (14th and 15th) markets will know what the Fed will do, the Fed will not surprise anyone when the time comes.

In summary, it is not unusual to see defensive posturing before significant events such as jobs reports or Fed Statements, but rates have already risen about .25% just since the end of February. It is going to take some discouraging economic news or global discord to turn our rising rate tide. For now, I am back to locking at application, as the trend is not our friend. Only those with the highest level of risk tolerance should consider floating – or if you have some time on your hands.