Mortgage Rates Not Moving - Waiting For FOMC Announcement

Mortgage rates are not moving much today as it seems everything seems to be on hold as the FOMC policy statement today at 1:00PM followed by Janet Yellen’s press conference is at the top of everyone’s focus.  As noted previously it is not the rate increase that is already discounted in the present rates, it is about what the policy statement and how it is interpreted for future Fed moves and how Yellen fields the questions. And not to be overlooked, the quarterly Fed forecasts for growth and inflation, which is sideways so far today. 

We had a better start this morning with Retail Sales as the February data matched expectations, with the January data seeing major revisions upward and shows that Retail Sales were much stronger to start the year than originally thought. Generally, a better look based mainly on the revised January control group but consumers still lagging somewhat - yet media saw the data as solid relying on the decline in auto sales as the reason for overall sales being weak.

The February Consumer Price Index (CPI) matched market expectations. The bond market was focused on the headline YOY reading of 2.7% which is the highest in over 5 years.  The Empire (NY) Manufacturing Index continued its very recent trend of stronger than expected readings coming in higher than anticipated.  The NHBA Housing Market Index for March also beat expectations as it jumped to one of the strongest readings on record. Last, the Business Inventories from January matched market expectations.

The much anticipated March FOMC meeting will conclude today. The Fed has done everything that it could over the past month to move the markets to expect a rate hike. If they do raise rates a 1/4 point, there is still much that they can do to impact MBS pricing (mortgage rates). First, at this meeting we also get their economic projections which contain the famous "dot plot chart". This chart showed at least 3 rate hikes in 2017 the last time it was released but it took until last week for the market to finally believe them. Will this new dot plot chart show 4 hikes? Will it show more in 2018?

Also, we get a live press conference with Fed Chair Janet Yellen and her responses to live questions can really move pricing. MBS will also be EXTREMELY sensitive to any discussion or mention of the FOMC looking into or considering a time line to slow the rate of MBS purchases.

Several concerns are going on overseas that I have mentioned before, but is taking a backseat thus far today.  If anything materializes on that, I will mention it later as all eyes are on the Fed. Stock indexes and treasuries both at very key technical levels now. At 11:00AM, the 10yr, driver for mortgages, at 2.58% with major support at 2.62% that is the highest rate going back to Sept 2014. The DJIA presently testing its 20-day average that has not been violated since back in November when Trump won and it’s the same for NASDAQ and S&P. Looking heavy in equity markets and now hearing increasing comments that a correction is likely. In my opinion equity markets are over-valued and a big correction is necessary for the longer health of the stock markets.

My suggestion is to lock now unless you are one heck of a gambler and lady-luck is on your side.