Mortgage Rates Hit Highest Levels in More Than a Month

It has been a slow and steady, to be sure, but mortgage rates finally inched their way up to the highest levels in more than a month today.  What is so interesting, that this occurred when the MBS pricing and 10yr Treasury was improving today, before ending ironically at the same point where we started this morning. While the move higher does bring the dubious distinction of "highest rates in a month," it still was not much of a movement during this period.

This morning April PPI was hotter than what had been expected.  After looking into the particulars on what was involved in the report, the traders did not react much.  The Fed’s favorite inflation gauge is the personal consumption expenditures. Tomorrow April CPI usually gets more focus.

Another soft treasury auction this afternoon, but this time there was no noticeable reaction to the slight weakness.  

Two additional data points tomorrow that pending their releases also may have an impact on financial markets. March business inventories expected up 1.0%, anything less is a negative for the economic outlook.  Within the report is final sales data and indicates how inventories are being managed. The mid-month U. of Michigan consumer sentiment index is projected higher than March figures.

There is enough in tomorrow’s data to set up big moves in stocks and interest rates depending how the data flows.  Mortgage rates are holding quite well given the Fed’s expected increase in the FF rate in five weeks. Curiously there are very little in the way of opinions out there to explain how rates are holding at these lows. Lots of one liners but no attempts to explain. No geo-political concerns, inflation creeping higher, the outlook for the economy by most analysts and economists is for increased growth. Al of those things usually pressure interest rates. There are some of us who believe that regardless of all the optimistic forecasts are not quite as solid as many are led to believe. Safety is still sought by large investors that expect a big drop in the US and global equity markets once it sinks in that the economy is not likely to meet forecasts as the Trump rally implies.  Regardless of why, rates are holding quite well. 

In summary, I am going to wait until tomorrow to make my final decision, personally it might be an opportunity to consider floating at these levels, specifically with the recent signs of support.  That said, you always must evaluate risk vs reward.  The reward?  I cannot believe you are going to see a large amount of improvement over the next week or two, just floating to the lower side of the range, with minimal rate improvement.  The Risk?  We break support and see rates go significantly higher.