Mortgage Rates Sideways Amongst Volatility

Mortgage rates were moving sideways early this morning, but took a turn upward after the latest economic report this morning. The market has been experiencing high volatility, and today it is no different.

Early trade this morning had the 10yr slightly lower in price and MBS prices fractionally lower. Early futures trading in stock indexes had the DJIA better after a minor retreat yesterday. No stopping the enthusiasm in equity markets now, the latest support coming from the rate increase coming at the next FOMC meeting. Goes like this, if the Fed is ready to increase it is because the Fed believes the economic outlook is improving and inflation is edging higher. Historically that interest rates will increase is a downer for stocks but with interest rates at these present low levels investors are not worrying and seeing the Fed increase as a big positive. Investors and stock market bulls also got a push earlier this week when on CNBC Warren Buffett commented that with current interest rates at these low levels stocks are not overvalued has gained traction recently.

At 9:00AM, we got another red-hot economic data point.  ISM Non-Manufacturing represents more than 2/3 of our economic engine and it was very high, coming in at 57.6.  Any reading above 50 is expansionary and a reading near 58 is fantastic. 

Big day for the Fed as next week, they enter their "black out " period where they are mum until the next week's FOMC meeting. Today we have some big hitters with voting board members Powell and Fischer as well as Janet Yellen. We also hear from regional bank presidents Evans and Lacker.

Normally, an ISM reading as high as the one we just got this morning would have really pressured MBS - but for now it is holding. If it holds, we could be looking at a sideways day. However, we are going to hear from the Fed's number 2 (Fischer) and the Fed's number 1 (Yellen) and this afternoon their comments could have an impact on pricing. They would have to take this last opportunity to completely change their narrative and message over the past two weeks for MBS to rally. But the same message that we have been seeing will not pressure MBS lower. It will take an extra push from Fisher and Yellen for MBS to sell off more.