Mortgage Rates Retreating Just a Bit

After yesterday Jerome Powell testified at the House Financial Services Committee and gave a bullish report on what to expect from the Feds, the reaction sent stock indexes down and interest rates a little higher. Businesses do not like higher rates for the obvious reasons and fixed income markets do not like increasing interest rates. However, we are seeing a bit of a retreat in the bond market thus far today.

Where Are Mortgage Rates Going?                     

>>> Rates are retreating just a tad today

Jerome Powell painted a picture of steady rate hikes as he went before the House Financial Services Committee as part of a semi-annual testimony. Most analysts walked away from the testimony fairly satisfied with the way Powell handled himself.

The written statement was right in line with what was expected, and even his answers in the Q&A did not cause most policy experts to adjust their positions.  

The one critique that seemed to pervade discussions on his performance was the fact that he played up the strength and growth of the U.S. economy to the point where he was hinting at four rate hikes in 2018. This did create some jitters in the markets, somewhat unnecessarily, according to several pundits. There was really nothing for Powell to gain from this move and it only sets the stage for him to have to walk back these comments in the future.

Based on these remarks, we did see the yield on the 10-year Treasury note (the best market indicator of where mortgage rates are going) move up a few basis points. Mortgage rates typically move in the same direction as the 10-year yield and similarly edged higher yesterday. Today, the 10-year yield is down about one basis point but still higher than where it started the week.

No changes in our negative near-term outlook for interest rates, as technicals remain bearish.  We tested the 20-day moving average yesterday on the 10-year but died. Wider looks still call for the 10-year to test 3.00%/3.05%, the level that either must hold or rates will continue to increase. We have looked to float recently but have had to cover quickly with no sustained improvements in prices.

Rate/Float Recommendation           

>>> Lock in a rate soon before they rise significantly

Mortgage rates are having one of the smoothest weeks of 2018. There is still a lot of time left before the weekend, but all signs point toward rates staying within a tight range this week.