Mortgage Rates Moved Lower Again

Mortgage rates moved lower today, continuing the recent trend of improvement.  Investors are feeling more cautious after Fed Chair Janet Yellen expressed a surprising amount of caution around the topic of hiking rates and providing economic accommodation.  MBSs opened stronger this morning and really did not move too much after my morning report.  The 10yr note declined to the lowest level (1.72%) since late February and also did not move much the rest of the session. The lack of intraday trading suggests traders still reluctant to pile into treasuries as a safety move. The stock market at the moment is at the head of the list in terms of motivation for better rates, second is the crude oil markets. Crude was trading lower through much of the session until news hit that an oil explosion at a well occurred in Iraq, the price rebounded and is ending the day slightly higher. Shows how touchy oil prices are these days.

This morning’s ISM services sector index improved a little more than thought but the headline index was not the news.  The employment index that has been stuck in contraction for months (under 50) jumped back to contraction at 50.3 from 49.7. In terms of data, the ISM was the most important this week, there is not much data remaining this week. As I noted recently, I do believe the stock market is pointing to some contraction, and that is one key support for investors to hide from risk. The VIX index is hardly moving at low levels recently, that at times is a leading indicator for additional selling.

Tomorrow afternoon the minutes from the March 16th FOMC meeting will be released. There is usually something interesting in the minutes but we are not expecting anything this time. Janet Yellen in her speech to the Economics Club of NY after the FOMC meeting kind of put her foot down and made it plain to the Fed’s hawks there will be no series of rate increases and reiterated her increasing concern of the potential contagion effect on the US economy on weakness in almost all global markets.

In summary, bond markets eased upward today, and pricing improved marginally from yesterday's bank rates.  MBS have now matched their highs for 2016 (meaning lowest rates).  It will be interesting to see if we can continue past them.  While I'm not jumping to lock my floating loans, I am certainly aware that we may be nearing the end of this 3-week rally.  Right now, I would still float unless you are ready to close.