Mortgage Rates Showing Little Movement

Mortgage rates are moving sideways again as we have had another quiet start in the bond and mortgage markets this morning.  At 11:00AM, MBSs are slightly positive and the 10yr is at 2.39%.  There has not been any economic or any other news the past two days that moved markets as we await Janet Yellen’s testimony in Congress tomorrow and Thursday.

This morning, the June NFIB Small Business Optimism index slipped a little from May from 104.5 to 103.6 on estimates of an unchanged read. The lowest level of the year in a continuation of the mild decline from the 12-year high set in January. The June setback, which put the index within the range but near the bottom of analysts' expectations, reflected disappointment over the gridlock in the Senate on the health care reform bill, according to the NFIB. Four of the index's ten components posted a gain, five declined, and one remained unchanged. Overall the index is still strong.

Congress took 10 days off before returning yesterday. Guess they were too tired passing key legislation. Health care still unresolved but as is usual for the party in “charge,” reports that a bill could come soon. The Republican legislation would phase out the Obamacare expansion of Medicaid health insurance for the poor and disabled, sharply cut federal Medicaid spending beginning in 2025, repeal most of Obamacare's taxes, end a penalty on Americans who do not obtain insurance and overhaul Obamacare's subsidies to help people buy insurance with tax credits. Whatever it is, it is likely to be another false start. Congress has three weeks left before members get tired again and take off for Summer recess until Sept 5th. And they get paid, retirement - and free health care. No tax cuts this year, regardless what the politicians say - no infrastructure spending this year no matter what politicians say.

May wholesale inventories came in close to expectations and with the revisions from the previous month, no change overall from what was expected.  Also, the May JOLTS job openings were expected to have declined from 6.044 million to 5.975 million. Not sure why anyone cares about it, but it does get ink. Job openings lower, at 5.666 million.

At Noon, Treasury will auction $24B of 3yr notes, tomorrow $20B of 10yr, and Thursday $12B of 30yr.

Crude oil was a little lower this morning, but has found support early this morning. Forecasters who were expecting higher prices this year are beginning to change their outlooks.  Without a significant fall in oil inventories or a decline in U.S. drilling and production, Goldman Sachs said U.S. crude could drop below $40 per barrel.

Should be another quiet session with investors and traders awaiting Yellen tomorrow at the House Financial Services Committee.

Interest rates and MBS prices have been generally unchanged for the last four sessions, and I am not anticipating any issues and expect the same listless activity. All the models and momentum oscillators remain bearish, and for this to turn around, the 10yr note yield must drop below 2.30% or hold at this level for another 5 sessions – but I am not holding my breath on this. Continue to lock at application if less than 30 days away.