Mortgage Rates Trending Unchanged This Morning

Mortgage rates are trending unchanged this morning after what we last week as the MBS market was fairly calm.  The 10yr for the last eight sessions has been what we would call unchanged, trading between 1.56% and 1.60%. MBS prices trading in a 10BPS range. Nothing has moved the bond and mortgage markets recently.

This week there are three items that can have a significant potential to move pricing for MBS. The Federal Open Market Committee (FOMC) will conclude two days of meetings on Thursday and give us the interest rate decision and policy statement. The markets are not expecting any movement at this meeting but are looking to see if it still looks like we are on track for at least one rate hike this year. It will be interesting to see their comments now that the Brexit vote has occurred and our own strong domestic data.

We will get our first glimpse of the preliminary 2nd QTR GDP and the market is expecting a very high reading of over 2.50%. The Fed has said several times that they will make their policy decisions based upon the strength of the 2nd QTR, so this is very key.  On Thursday, the Bank of Japan meeting is critical. The markets expected both the Bank of England and the ECB to lower their rates this month and neither happened. The bond market is also expecting more easing from the BofJ, the size and scope of which will have a big impact on all of the markets.

There is now, and has been, no compelling or driving influence in the interest rate market going back to july 15.  I do look for any significant movement until Wednesday afternoon when the FOMC releases its policy statement. There is some thoughts that with stocks moving into new all-time highs the Fed may send a more direct signal that it is prepared to increase the Fed funds rate at its September FOMC meeting, but that is a long time in terms of the uncertainty about the real strength of the economy and in the end going back to the beginning of this year Janet Yellen has always fallen back to her ‘data dependency’ comments. The statement on Wednesday may be more direct but then will again reference data dependency. US and global markets still not sure what the UK exit will have on growth. Likely though in the end it will not cause much economic impact unless more countries in the EU begin to suggest more exits.

Unlike last week, this week we have a lot of economic data that could move mortgage rates out of this tight channel. I will be keeping a very close eye on the various news items and economic data that will affect the mortgage bonds this week.  At 10:00AM, the 10yr note yield unchanged after re-testing 1.60% once again early this morning. MBS are fairly flat as well.