Mortgage Rates Slightly Lower

Mortgage rates for the second time this month moved slightly lower, but not in the terms of rate, but in the terms of fees charged.  It was quiet with little movement as I expected this morning. The DJIA in a 70-point range after ranging 200 to 300 points a day a few times last week. All about the FOMC on Wednesday, by now that is old news but that’s all there is folks - especially today with no economic news.

Tomorrow, after six sessions with very little economic measurements, traders will have a lot to consider as will the FOMC that will be in session. At 7:30 February retail sales are not thought to be that good.  Also in the same light, the February producer price index and the NY Fed Empire State manufacturing index.  We then see at 9:00 March NAHB housing market index, along with January business inventories.  Remember, inventory growth is a key factor in GDP computations.

Two weeks ago I commented that auto sales and auto manufacturing would likely increase and not likely to be as powerful as in 2015. It always amazes me that I see these comments several weeks later as I did today in the WSJ – as it talked about auto leases in delinquency, the highest level in 20 years. There is also coming another hurdle later this year and next, the end of a lot of three year leases that will flood the use car market and keep prices low, in turn making new car sales less attractive when people can buy a three-year-old car still on warrantee with low mileage and all of the bells and whistles.

Pending the results of the retail sales and PPI tomorrow markets may have some volatility but with the Fed on Wednesday it is unlikely investors and traders will press markets much. The scenario that may push rates higher and prices lower would be increased PPI and stronger retail sales than the consensus. The odds of an increase by June have jumped to 43%, and the odds of one by December are now 75%, based on the price of interest-rate futures on Friday.

In summary, bonds leveled off today, as the upward rate trend at least paused. There was scant data to motivate bond traders, but the rest of the week brings copious data, including CPI and the Federal Reserve statement (with subsequent press conference from Chairwoman Yellen). Floating borrowers still need to be aware that a robust economic data or rhetoric could easily send rates higher. Float with caution if you can stand the risk.