Mortgage Rates Higher for the 10th Day in a Row

In and of itself, today was not too bad of a day for mortgage rates, as they were only slightly higher after the day was done.  The market was generally unfazed by the release of the Minutes from the most recent Fed meeting.  Market participants were concerned about the Minutes making a clearer case for a rate hike at the next meeting.  Ultimately, the Minutes did not tell us anything we did not already know and bond markets (which dictate mortgage rates) improved. 

Treasury sold 3yrs and 10yrs today, but was not met with much enthusiasm.  The mortgage market had no reaction to the auction.  

Federal Reserve Bank of New York President William Dudley said today continued low inflation and a desire to let the job market gain more ground creates no urgent need to raise interest rates. “We are at a point where the economic expansion has plenty of room to run” and “I think our expansion can last a good while longer,” Mr. Dudley said. “Inflation is just a little bit below our target, rather than above our target, so I think we can afford to be quite gentle as we go, in terms of gradually removing monetary policy accommodation.” He lauded job growth saying discouraged workers are coming back into the job market. “That’s one reason why I think the Fed has been relatively patient in terms of raising interest rates this year, because there’s more slack in the labor market than is suggested just by the unemployment rate.” Then be began talking in circles – which is common for these types of people.

The dollar continued to strengthen today, as it has been strengthening for the last six sessions. More indication investors are setting up for a Fed move later this year. Tomorrow still lacking in key economic data. Weekly claims no longer a major input. September import and export prices will get some focus. Also tomorrow Treasury will auction (sell) $12B of 30yr bonds reopening the 30 issued in August.

Expect treasuries and mortgages to begin more two-way trading after the rapid increase in rates since the end of September - but any improvement is not going to change the bearish technical outlook and should be used to get deals done.

In summary, following the FOMC minutes release, bonds did manage to rally some.  Today’s move is giving me some hope that the selling might be over.  Not sure we will see large improvements in the coming days, but I think it would be worth it to evaluate pricing in the morning since we have seen nearly a quarter point rise in our rates.