Mortgage Rates Show Little Movement

Mortgage rates have not moved too much recently – as we have been in a very narrow range for the past four months – but there are still those who will not pull the trigger as they feel that it will go lower – but when?  I do agree, rates more than likely can and will go lower, but with the rates we have today at three year lows, why should you wait when you can have it now? 

The 10yr closed at 1.61% and MBSs were positive all day.  I do not believe it is because of the FOMC as much as the coming UK vote in 10 days. The London Times survey is increasing quickly toward a vote to leave; the polls shows that side up 46% to 44%, the first lead for "Leave" since the poll's inception. The FOMC is important only for how the group frames the economic outlook and any slight nuance from the last meeting. Yellen will hold her press conference after the meeting and will be faced with increasing concerns about why the Fed continues to waffle, but her out is the UK vote.

It has been over a week that markets have had key data to trade.  Tomorrow we do get May export and import prices and import prices, May retail sales, and later on, April business inventories.  Also FOMC meeting begins.

Mostly markets concerned about the UK vote than the Fed right now. No one has much of an idea how markets will react if the leave vote prevails. Some in the EU believe it will cause destruction of the western economic world, although that is very extreme and likely said to scare the Brits that want to leave. Nevertheless, it will dominate markets and the Fed. In her press conference after the meeting on Wednesday questions about why she believes the US economy can stand a rate hike or two, but she is going to face a barrage of questions about what she thinks will occur if the UK splits. Some concerns out there is how will it go down with other EU members. Could the exit vote start a stream of countries that are not pleased with the EU structure?  Different cultures and societies mixed together is still an experiment as far as I am concerned, as what started in 1998 - so far has not been successful in solving problems.

In summary, volatility is increasing.  The stock indexes were hit last Friday and again today. The models are strongly bullish now. Bottom line: the bigger-picture trend is friendly, but it is facing some psychological resistance as rates approach all-time lows.  Neither locking nor floating is a bad call here, but be aware that the worst case scenario would push rates up faster than the best case scenario would push rates down.  Still, I am not sure the Fed can say much on Wednesday that greatly affects longer term rates like mortgages considering global markets are waiting for next Thursday's Brexit vote.