Mortgage Rates Trending Higher

Mortgage rates are trending slightly higher this morning.  Last week the MBS market and the 10yr ended basically where it had begun, which was not enough to worsen mortgage rates or fees.  While the week ended unchanged, mortgage rates did experience very high volatility.

There are the three events that have the greatest potential to impact MBS trades this week.  The FOMC, the BofJ, and the ECB/Draghi. Yes, all of these are basically a Central Bank Palooza as there are no domestic economic reports that can impact pricing this week.

This is the week markets have been aiming at for the last month - the FOMC meeting and the Bank of Japan meeting. The likelihood of a Fed move as you know by now is remote.  However, it is about the statement and Janet Yellen’s preconference on Wednesday afternoon. The Bank of Japan is more of a toss-up, talk there is a stronger possibility the central bank may add more stimulus. All of the negative rates and bond buying have not met with the desired results so far.

The European Central Bank also has meeting on Wednesday but it is a non-monetary policy meeting (meaning they will not set an interest rate). But the key will be on Thursday when ECB President Mario Draghi speaks and we will get their reaction to the BofJ and our FOMC. Will their action (or inaction) cause the ECB to loosen up and extend their bond buying program?

While there are no major domestic economic releases this week, we do have a lot of real estate a news that will give us a good read on the state of our housing market.  We did get a surprise with the September NAHB housing market index coming in higher after a fall back last month.  This was not expected and a big surprise.

This week COULD set the path for mortgage rates until the end of the year. Mortgage rates could stay relatively flat until Wednesday and then we could see mortgage rate volatility.  This week could end up very volatile.  Be careful.