Mortgage Rates Stagnant

Mortgage rates are stagnant on this last day of trading for the first quarter. If anything, they are moving ever so slightly the opposite direction (down) as it did up yesterday. The Fed increased the FF rate on the 15th of this month, widely expected but in the last two weeks, rates have held quite well. Fed officials calling for two and three rate increases depending on who is speaking now. Trump has not had the best luck with health care, and markets have not reacted one way or the other. So far apparently, it has not sunk in with investors, media and some analysts that 2017 growth is not likely to meet the expectations of 3.5 to 4.0% growth.

The news from the reports this morning did not come out with any big surprises, as the Inflation data – Personal Consumption Expenditures (PCE) Year-over-Year (YOY) is finally back above 2.0% for the first time since April 2012. Personal Income continues to make gains better than anticipated, but the spending is being held back as what was forecasted as it seems more are holding onto what they have.  Chicago PMI hit the highest level since January 2015 last month, and this months was even better.  The last bit of data, the final March U. of Michigan consumer sentiment index came in as expected.

New York Fed President William Dudley (voting member) said the Fed needs to gradually remove "accommodation" and bring the Fed Fund rate to a Neutral level, which adjusted for inflation at 2.0% means the Fed Fund rate needs to get to 2.00% or above. Of note is that he said that the Fed will start to look at its balance sheet at the end of 2017 and is "agnostic" as to the mix of Treasury vs MBS holdings that would be cut.

A lot of economic data out today for the markets to digest. This would normally point to higher volatility. However, we have been stuck in a very tight mortgage rate channel and I do not see anything in these numbers that should push us out of this range. At 11:00AM, we are seeing the negative MBSs that we had yesterday turn positive nearly the same number, while the 10yr is at 2.41%.  It would be nice to see it at the 2.3 level again.