Mortgage Rates Moving Higher

Mortgage rates are not having a good start today as we see at 11:00AM that the 10yr is back above 2.30 to 2.32%, and MBSs are negative at -28BPS after closing in slightly negative territory yesterday when I did not have any reports.  Stock indexes rallying nicely, crude oil still increasing after the oil producing countries got together yesterday, and the FOMC meeting begins today. The 10yr at 2.30% breaks our near-term support at 2.28%.

With the 10yr breaking the support barrier, I did not expect this kind of selling this morning, or that the DJIA would be this much higher ahead of the FOMC that has started today and ahead of the policy statement tomorrow afternoon.

GM reported better quarterly profits than expectations and is one support for the equity markets this morning. Auto sales have been weak the last four months, but the GM news has boosted an otherwise weak outlook. GM still has more inventory than what it said last April when it reported Q1.

The U.S. Dollar Index is down 0.30% to 93.70 as President Trump tweeted that his administration would pursue a free trade deal with the U.K. WTI crude is higher by 1.99% at $47.27/bbl. Bloomberg notes today that the physical market has been firming up even as futures prices have remained weak. Better economic news from Germany this morning has added to the soft bond market and helping stocks.

The May Case Shiller Home Price Index YOY hit a new all-time high. The May FHFA House Price Index showed a MOM gain of 0.4% vs est of 0.6%. Neither affected the pricing as this is considered old data. However, the most important economic release of the day was Consumer Confidence, and the reading came in well over expectations which has been negative for mortgage rates.

Today starts two days of Fed meetings that will culminate in a vote and the release of their interest rate decision and policy statement Wednesday at 1:00PM. The Treasury will kick off three straight days of dumping out debt into the market place with our short term 2-year note.

The solid Consumer Confidence number is negative for mortgage rates.  I am seeing mortgage rates bump up on relatively high volatility, and more of the same the rest of the day.  While the short-term outlook has looked OK, the wider perspective has never gotten serious, with most looking for rates to move higher. All depends on how equities perform. Equity markets are where investors are profiting, on the view, the economy will continue to grow, even though there is no hard evidence that growth will improve. Mostly wishing. It will take a major reversal in stocks to add demand for safety in US Treasuries.  Right now, I would lock and wait out the storm as the trend is not our friend.