Mortgage Rates Paralyzed

Mortgage rates were generally flat today, despite improvements in underlying bond markets.  I must admit these improvements were generally "token" in nature and did little to alter the sense of paralysis in the bigger picture.  This is the third straight day with essentially no change.

Last Wednesday the FOMC policy statement was seen as mildly dovish. 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 actually means in the minds of the Fed). The Committee expects to begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated.

Next week is employment week on Friday. On Monday June pending home sales from NAR, July Chicago purchasing mgrs. index. Tuesday July auto and truck sales, July ISM manufacturing index, June construction spending. Wednesday July ADP private jobs, Treasury quarterly refunding announcement (new 3s, 10s and 30s will be sold the following week. Thursday those weekly claims, July ISM services sector index, June factory orders that will also provide more detail on durable goods orders released yesterday at +6.5%. Friday July employment data.

Uncertainty, fear, a lack of inspiration, or some combination of the three all have the ability to paralyze rates from time to time.  Uncertainty is leading the charge at the moment.  On the one hand, we have global central banks chomping at the bit to drain the proverbial punch bowl (buying fewer bonds and raising rates).  On the other hand, those central banks admit they cannot be too aggressive without justification from rising inflation, and inflation seems to be in short supply based on recent economic data.

In summary, with bonds in the green following weak inflation data and news out of North Korea regarding a missile launch, I think it is worth the risk to float and see what Monday brings.