Mortgage Rates Quiet Ahead of Fed Statement

Mortgage rates are quiet so far today, even with the slight improvement we saw late yesterday after experiencing high volatility.

Yesterday’s volatility in the bond and stock market occasioned by the reversals in polls that until last Friday had Hillary Clinton a slam dunk to win the election. After the FBI said Friday it had more e-mails to look at about the Clinton e-mail saga polls have turned to a toss-up now with six days to go. Since Friday uncertainty has increased pressuring the stock market and fueled a slight move to safety in the US bond market. Yesterday 370 economists wrote an open letter warned that a Trump win would be “a dangerous, destructive choice,” because he “promotes magical thinking and conspiracy theories.” Make of that as you will. Not many in the global financial world have any idea what Trump will do as president and that uncertainty is rattling markets now. Seems like there are more polls out now than voters; most though when counting the electoral college still have Hillary winning.

The October ADP Private Payrolls at first glance, looks weaker than expected (147K vs est of 165K). However, the piece of news getting bond traders' attention is the fact that September was revised upward significantly from 154K up to 202K - that is over 60K! Hence, looking at the big picture, there were more jobs after the report than anticipated.

Later today at 1:00PM we will get the Fed’s Interest Rate Decision and Policy Statement. No rate increase today, the Fed won’t move ahead of the election and still hasn’t completely convinced markets a Dec hike is going to occur; the current trading in the FF futures markets at 69% probability a Dec hike will happen. There are still a lot of economic reports and the election that could sway thinking. US and Global equity markets trading at excessive valuations, global economies including the US are barely holding on and each forecast from the IMF, the Fed, the ECB that are released have been revised lower for the last two years. It will not take much to send equity markets spinning lower.

Today has the potential of being a high volatility day with the Fed's policy statement.  However, it is very unlikely that the Fed will do anything unexpected ahead of the election.  We expect that they will give the markets what they're expecting, which is no rate hike and remain basically data dependent for a December rate hike.