Mortgage Rates Quiet to Start Jobs Report Week

Hope that everyone had a Happy Memorial Day – as it seemed a lot did as it was very quiet over the long weekend. This morning at 10:30AM, we are seeing the 10yr at 2.23% while MBSs are jumpy in the positive territory by 7BPS.

The early morning reports showed April personal income and spending both reported right on forecasts. March personal spending originally reported unchanged was revised upward.  Inflation not as firm as was expected around the markets -  the personal consumption expenditures (PCE), Janet Yellen’s favorite inflation read, came in as expected, while the yr/yr has both of these inflation gauges below what the Fed is aiming for. There was little reaction to the reports.

Later we got May consumer confidence index, came down a little and has been slipping as of late, but the index is still strong.

Crude oil is lower this morning on continued concerns that the OPEC output cuts are not enough to lower the supply/demand equation. Still tilting at windmills that OPEC and Russia can push prices up – however, supply will not decline as long as demand is less than inventories. Crude, a significant influence on all commodities and key inflation gauge still not falling but not increasing either.

This is employment week, the last very critical data before the FOMC meeting on June 13 and 14. Markets are still expecting the Fed will increase the federal funds rate at the meeting. Along with the policy statement, it is the meeting the Fed will report the FOMC forecasts going out two yrs.

Last week interest rates were unchanged in five sessions, while MBS prices ended the week where they began on Monday. The technicals are still holding minor bullish readings, as the 10yr cannot break its strong resistance at 2.23% where it opened this morning.