Wednesday, November 18, 2015 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 -
Mortgage rates are having little change these days after hitting four months high last week. This after hitting six month lows in October. Even though the mortgage rates are not tied directly to the Fed rate, most rates tend to move in the same direction just based upon the likelihood of the increase.
Most are waiting for the November Employment Report on December 4thwere certainty will be confirmed based on what the data shows. Again the minutes were vague on which way the thinking was directed, but it did state one point that to say one increase will not start a parade of increases - the subsequent path of rate increases is likely to be exceptionally shallow and gradual.
The bond and mortgage markets initially rallied a little on the minutes, but the fell back in the tight ranges we have seen for the past several days. The stock market recovering this week from the huge selling last week. The interest rate markets holding steady though with no noticeable buying. The Paris terrorist attacks keeping the safe haven in US treasuries intact but not significant enough yet to have pushed interest rates lower. Hard to accurately handicap what the Paris attacks will lead to in terms of more attacks and/or increasing military action against ISIS. More attacks outside the Mid-East will add more fears and safety in markets will increase rapidly. One and done will fade quickly in markets but not politically globally or domestically. In Europe after the Paris attacks the economy is likely to slow more and consumers unlikely to be big spenders this holiday season.
I continue to expect some improvement in the bond and mortgage markets, but so far not much to reverse the bearish trend. I am about to toss the towel in as there has not been any retreat to speak of worthwhile.
In summary, following the release of the FOMC minutes, MBS and Treasuries both moved to their best levels of the day. The minutes contained no surprises. If you can tolerate the risk, continue to float, but as I mentioned, I am about to just toss in the towel and go back to locking short term. Let's see what the morning brings to us.
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