Mortgage Rates Calm - But Check Out the 10yr Treasury at 1:15PM

Mortgage rates are basically the same as they have been for the past ten days.  It seems like we are still treading water waiting for the big announcement this afternoon from the Fed.

Weekly Mortgage Applications fell across the board last week, more so from the refinances than the purchases, but both in negative territory. Pending Home Sales June reading improved, but was nowhere close to expectations, but was still nice over the negative number from May.  Wages are up and rates are low which is providing high demand. But inventories are at 4.8 months and the median prices are at an all-time high which is making finding a home very difficult. This is good for overall housing market health.

Durable Goods Orders came out with a dismal report. The Headline data showed a contraction of -4.0% which was far below the consensus estimates of -1.1%. This is helping to push mortgage rates slightly lower this morning.

The FOMC will conclude their meetings and announce their latest rate decision and policy statement at 1:00PM today. The market is not pricing in a rate hike at this meeting.  However, our economy desperately needs a rate hike to spur lending by banks so that small and medium sized business can grow. The key will be the language in their policy statement. Bond traders will be focusing on the overall tone to see if their bias shifts from the weak protectionism of the last meeting to a more balanced one.

The FOMC is likely to say the economy has improved since its last meeting but there are still some headwinds that will keep the Fed from increasing rates. It will as in the past refer to data dependency going forward. Sept is in play but most believe if the Fed actually does make a move it won’t be until Dec. Look for the members to refer to the uncertainty in the EU over the UK exit. Expect the statement to say inflation is increasing in some sectors but not yet at its 2.0% goal. Analysts will dissect every word for clues as they always do and dream up some meanings behind every comma and sentence. The reaction at 2:00 pm will be volatile for about 30 minutes before everyone gets on the same page following like lemmings as a consensus rapidly forms.

Usually after a prolonged tight range that implies uncertainty a breakout occurs pushing one side out of its positions. Presently price action is evenly divided between bullish and bearish; one side will get hit today. Current technicals are neutral, a positive reaction will push the 10yr yield to 1.46% in the next two sessions - a negative reaction up to 1.70%. MBS prices, either +25 or -25BPS.

If you are still floating, wait for the news at 1:15PM as the 10yr will give you the answer.