Mortgage Rates Continuing to Move Up

Mortgage rates are moving higher so far today.  Since February 16^th, we have seen positive movement with mortgage bonds, but we have seen that all evaporate this week where we are seeing levels back in mid-January. 

The stock explosion yesterday was on the belief President Trump will be able to achieve his goals - driven only by his change of delivery and temperament, no one liners, no jabs at the media or political opponents; very presidential. The thinking now is he will be more amenable to discussions and convince his adversaries to work through them with cooperation. Republicans more optimistic that his new tone, but holding their breath that he won’t revert to his contentious comments. Likely he will tone down his attitude toward the media. It is not just his speech - as I stated yesterday there has been a big increase recently that the Fed will move on the 15th of this month.  Investors are enthusiastic that the Fed is now believing the US economy will grow this year - and Buffett’s remarks Monday that at current levels he does not believe valuations are too high as long as interest rates remain relatively low.

Early this morning, the stock indexes in the futures trade were slightly better.  The 10yr yield opened at 2.48% and MBSs started again in negative territory.  Weekly jobless claims were expected to be generally unchanged, as reported claims declined back to 233K, with the 4-week average down to 234,250 - which in a confirmation of strength. And like the week's 223,000 headline level, the average marks a new low for the economic cycle, lows for both going back to the early 1970s.

More ‘confirmation’ that the Fed will act in two weeks came from Lael Brainard, a member of the Fed’s board of governors and one of the strong doves at the Fed saying “Assuming continued progress, it will likely be appropriate soon to remove additional accommodation, continuing on a gradual path”. A Fed dove is advocating a move soon, adding to the conviction that the Fed will do the deed. By the time the meeting occurs markets will have mostly discounted the increase. There should be no argument now about the Fed increasing rates in two weeks.

Nothing left today as there are no more economic releases. At 11:00AM, the MBS are still in negative territory at -20BPS and the 10yr has hit 2.50%.

It is almost becoming a foregone conclusion that the Fed will increase rates this month.  The economy and inflation continue to show strength giving the Fed a green light to start to move rates from these historically low levels.