Mortgage Rates Sideways - Waiting on Fed Announcement

Mortgage rates are moving sideways today.  The MBS market improved a little bit yesterday, but nothing of any significance as everyone has been waiting to see what the banks were going to do in regards to interest rates.

The FOMC (Federal Open Market Committee) will conclude two days of meetings this afternoon. Here is what we will get: 2:00 EST Policy Statement and Interest Rate Decision 1:00, with a live press conference with Fed Chair Janet Yellen following at 1:30. The market is basically pricing in zero chance of a rate hike, but the market could be wrong. Even if we do not get a rate hike, will the language turn more "hawkish" to prep everyone for a December rate hike? Of course, Janet Yellen is the dog that wags the tail and her responses to live questions from financial reports can really move the markets.

The Bank of Japan (BOJ) kept their key interest rate at -0.1% and left their QE program at current levels for the time being but it would adjust the mix of short and long term bond purchases in a direct effort to manipulate yields and has shifted their focus to directing the interest rates through those yields. They also dropped their explicit target of increasing base money, the amount of money it prints, by an annual 80 trillion yen ($788 billion).

There has been little reaction to the news thus far both in the MBSs and the 10yr note as of 10:30AM this morning.  I do expect mortgage rates to be relative flat with low volatility until this afternoon with the Fed rate decision and Janet Yellen's comments.  This could be a seminal moment for mortgage rates even if they do not raise rates.  Yellen's comments, if they dictate a high probability of a rate hike in December, could worsen mortgage rates significantly and cause high volatility.