Wednesday, April 6, 2016 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 -
Mortgage rates moved higher today, pulling away from yesterday's long-term lows. Today's move was not extreme, by any means - it simply brings rates back in line with those seen on Friday and Monday for most of us. This was the third consecutive day that the MBS prices set in the morning stayed generally there through the closing.
This afternoon's FOMC minutes from the March meeting were released, and as we thought, there was nothing in the minutes that markets were not aware of. NO movement in stocks or bonds when the minutes were released. There was some discussion of an increase at the April meeting but most were not on board. The one thing we might take away from that part of the discussion is that the FOMC is not concerned about a rate increase when there is no press conference following the meeting. Yellen holds a press conference every other meeting as did Bernanke. Is a June rate increase on the table? The Fed wants markets to believe that any meeting a rate increase is on the table. Presently trading in FF futures markets does not have a June increase as a possibility.
We can talk and think about a lot of issues that do or could have impact on US financial markets but there are just key issues for the interest rate markets. The stock market, and it is led by the daily price of crude oil. Crude runs markets now, and that has been a major factor since the beginning of the year. The price of oil has gained a life of its own, markets are acting like those lemmings, following oil as the only thing to focus on. Obviously there are other keys but when you match crude movement to the stock market and then in turn the bond markets there is definitely an outsized pattern. Crude higher, stocks higher, interests rate markets higher in yield.
Tomorrow morning weekly claims are expected out with little surprises from the tight range we are in, and in the afternoon February consumer credit data.
In summary, bond markets pulled back today, leading to slightly higher loan pricing, as an oil rally and Fed Minutes hinted at improving economic conditions. We are still near the best pricing since early 2015, nothing wrong with current rates, but hopes for a continued rally may hinge on new drama, whether economic or geopolitical. It would not surprise me to see rates rise slightly over the next few days, as I keep stating that if you are closing in the next few weeks, it is best to lock and take risk off the table.
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