Mortgage Rates Not Moving Much

Some improvement today in the bond and mortgage markets but you have to look hard to see it. Like yesterday, the markets opened then sat there all day with very little changes in stocks and bonds. There is not any driving news that has the potential to change markets thus far this week. This morning’s June housing starts and permits were better than forecasts, but that did not light any fires. Housing is not on fire but it may be making the difference for the economy as a whole, helping it hold in the modest growth range.

Treasury yields increased a little yesterday, today they slipped the same amount they increased. MBS prices were in the positive range all day, but again, nothing to hang your hat on. The 10yr closed at 1.55%.

The calendar has nothing tomorrow other than the weekly MBA mortgage applications at 6:00AM. Thursday the ECB meets with thoughts it will approve an increase in its purchases of debt to keep trying to motivate economic growth. For everything the ECB, the Fed, and other central banks have done over the past four years nothing has worked unless it is just keeping global economies from crashing down.

Some slight evidence inflation may be edging higher, depends on how it is compared and what data one believes is the most accurate. The Fed badly wants to increase the FF rate again but cannot now. Any increase in the FF rate now will drive the dollar higher and likely slow the already slow growth more. Traders are not betting on a rate increase until maybe in December, even that is questionable and it is a moving target at the CME FF futures markets. The FOMC will meet next week. The ECB this Tuesday and the Bank of Japan in 10 days from now.

Is floating a good stance to take right now? Everything is quiet this week and will likely to stay that way for the rest of the week unless something unexpected happens. Terrorist attacks, coups, nothing is adding much emphasis to expect rates will move lower at the present time. This is the kind of market that can whip-saw traders - sentiment not friendly to fixed income now - taking a long position (floating) in this kind of environment can get you in trouble – but then, it could be rewarding.  

In summary, I might be changing my mind in the morning as I may suggest to cautiously float, unless you are ready to close in the next 15 days.  This trade up may have been to quick, and I would like to see how it plays out over the next couple of trading sessions to determine if this was just an organic move in the big picture, or a decisive move higher.....