Mortgage Rates Flat - No Follow-Thru From Yesterday's News

Mortgage rates are moving sideways so far today after we had a good day yesterday in the bond market.  We saw that the 10yr fell to 2.21% with MBSs enjoying a nice positive day, but thus far at 11:00AM, we have had no follow-thru as the 10yr is still at the same 2.21%, even though it opened higher this morning, and MBS are flat.

This morning, we found that mortgage applications fell both in the terms of refinances and purchases.  April Pending Home Sales (closings in May/June) fell well short of expectations.  The reasons are the massive shortfall of inventory is making it difficult to hit higher sales volumes, also causing affordability issues with house prices rising.

With Manufacturing, the May Chicago PMI was lighter than expected and would appear to be a pull back from April's blockbuster reading - but really, any reading above 50.0 shows a month-over-month expansion (i.e. economic growth), and any reading above 55.0 is historically red-hot.

We have more Fed officials out there today, and it seems like most are repeating the same – that they expect two more rate hikes this year. 

We will get the Fed's Beige Book at 1:00PM where we get a report card from all 12 districts that are prepared specifically for the Fed to use in determining their action at that meeting. Do not expect anything significant - details from each of the Fed districts is interesting but usually not a factor in trading.

Crude oil continuing under pressure as what is to be expected - traders concerned OPEC may not be able to hold the cuts for much longer, as the US and Canada increase oil output at around $50.00/barrel. One more read on the outlook for inflation lessening now.

The long end of the yield curve is holding well as investors and traders continue to see less inflation ahead than the Fed or equity investors. Technicals remain bullish. With employment data coming on Friday, I am not looking for any significant changes until the details are reported. Two weeks from today, the FOMC policy statement and Janet Yellen’s press conference – here is where most of the markets expect the Fed will increase the federal funds rate but as inflation reads wane a little the possible September increase is now in question.

Look for mortgage rates to once again trade in a very tight range. It will take something very unexpected geopolitically or from the release of the Fed's Beige Book to push us out of this range.