Mortgage Rates Bounce Back After FOMC Announcement

Mortgage rates bounced this afternoon, after we saw the MBSs pricing decline yesterday and the 10yr yield up to 2.34%.  At one point today, we saw the pricing down even further and the 10yr edging higher in yield.  After the FOMC announcement, that all changed as we saw MBSs shoot positive and the 10yr yield dropped to 2.29%. 

The statement was slightly dovish compared to what was anticipated yesterday. Not much change in it from a wider perspective. The Fed still looking for 2.0% inflation but is finally coming around to the reality that inflation is likely to remain below its target for the medium term (once again I do not know what medium term means in the minds of the Fed).

This afternoon prior to the FOMC statement, Treasury sold $34B of 5yr notes. Just like yesterday’s 2yr auction, the auction was solid with strong demand. Tomorrow we get June durable goods orders and Weekly claims.  At Noon, we have the last auction of 7yr notes.

Stock indexes holding but not much today - the DJIA would have been negative today if not for Boeing’s financials blowing the doors off and the guidance also impressive.  

Yesterday the bellwether 10yr note broke its near term bullish bias, even the improvement this afternoon did not return it back. The pivot now is 2.28% on the note.

Yesterday it traded up to 2.33%, now 2.29%. The stock market continues to climb, does not matter what the news. Most of today the DJIA was up over 100 points but did slip into the close. The dollar was slapped down again today when the FOMC came out slightly dovish, the decline in the dollar rather impressive with little interest from traders to buy it -  but I believe a turn is getting close.  

Crude oil is moving back toward $50.00, its pivot point - a trading affair more than any serious fundamental changes other than a minor cut in output from the Saudis.

In summary, as for today's market motivation, the lion's share of the movement happened after the Fed Announcement.  This is interesting because the announcement was very much in line with market expectations.  As such, traders could have simply been in a defensive stance and waiting to make sure the Fed did not make any changes that would be unfriendly for bond markets.