Repeat – Mortgage Rates Steady

This is beginning to sound like a repeat of the past several weeks of my reports, but again, there is very little movement in the mortgage rates again this morning, even after the economic data was reported.  Currently we have the 10yr showing its biggest increase to 1.58% after opening at 1.55%, but the MBSs are flat with very little movement whatsoever.  There was another ISIS attack in France, two men walked into a Catholic mass and killed the priest.

The Bank of Japan is about to meet on Wednesday while the Fed delivers its next policy statement. More stimulus coming? Economists believe so but traders are not as sure about it as they were last week. The expectations have been, and still are, that the BofJ will increase asset purchases and cut rates further below zero. Japan has been trying to increase inflation for years with no success as its population ages.

Our Fed is not going to increase rates tomorrow.  The focus will be what the Fed thinks about the economy and inflation going forward. Even though the Fed has a miserable track record the past three years, nevertheless markets and media take every word as gospel. The thinking now is one more increase this year but that kind of thinking about rate increases has not materialized this year after the Fed clearly stated last December there would be four increases this year. Now it is questionable that one is likely.

The May Case Shiller Home Price Index came in lower than anticipated, but one needs to know this was old data from only 20 metro areas. Last week's Existing Home Sales (new high for median home prices) is a more complete data set and carries more weight. New Home Sales for June were much higher than expected, but is still too far below the 1M mark to help with uber low inventory levels. Still, another strong housing report.

The Richmond Fed Manufacturing surprised to the upside and showed some very strong results from June to July.  Consumer Confidence was much higher than expected and shows a very limited impact of the Brexit vote among domestic consumers. 

Today the Fed starts two days of meetings and tomorrow we will have their latest (and not so greatest) interest rate decision and policy statement.

Today we have our 5yr Treasury auction at Noon.  Just like yesterday's 2 year note, it is too short of a term to generally impact mortgage rates.

Today will be another day of little movement in the financial markets ahead of the FOMC tomorrow afternoon. While I do not expect mortgage rates to tumble today on the very positive housing and manufacturing numbers, I do see the risk of mortgage rate volatility increasing ahead of the Fed policy statement tomorrow.