MBS Day Ahead: Strong Trend Intact After Fed Day

Posted To: MBS Commentary

In the day just past, bonds were primarily concerned with reacting to the Fed announcement, press conference, and updated economic projections. Even though the Fed's median rate forecast for the end of 2019 remained unchanged, the average dropped from 2.49% to 2.17%. There were also a few verbiage changes in the announcement that paved the way for the Fed to cut rates in July if the economic reports justifies it. In the day ahead, bonds will attempt to add another day to the range breakout that began on Tuesday. Combined with yesterday's gains, the breakout suggests the trend channel highlighted in the chart below (yellow lines). Even if that trend channel doesn't last long, it would still be a victory if rates can merely treat 2.06% as a ceiling in the coming weeks. Economic data…(read more)

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MBS Day Ahead: Strong Trend Intact After Fed Day
MBS Day Ahead: Strong Trend Intact After Fed Day

Mortgage Rates Mixed Despite Positive Reaction to Fed

Posted To: Mortgage Rate Watch

Mortgage rates reacted favorably to today’s Federal Reserve announcement and press conference–today’s key events. But that doesn’t mean every lender is in better shape than yesterday. The morning hours saw the bond market (which dictates rates) at weaker levels. Weaker bonds = higher rates, all other thing being equal. It wasn’t until the 2pm Fed announcement that bonds began to improve, thus opening the window for mortgage lenders to issue new rates. Unfortunately, some lenders are less prone to mid-day reprices than others. There’s also always a healthy fear of volatility in the bond market after the Fed announcement, even if bonds start out moving in a friendly direction. On a final note, the press conference with Fed Chair Powell didn’t start until 2:30pm. By the time he was done answering…(read more)

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Mortgage Rates Mixed Despite Positive Reaction to Fed
Mortgage Rates Mixed Despite Positive Reaction to Fed

MBS RECAP: Fed Threads The Needle as it Preps Markets For Policy Shift

Posted To: MBS Commentary

As expected, today was all about the Fed-related events. Yields moved exactly as far we thought they might based on the Day Ahead , AND in a friendly direction! But if I had to guess where yields would end up based on the contents of the Fed communications, I definitely would NOT have expected the result we got. While the tone of the announcement was much more dovish than the previous example, it was far from "alarmed." And the unchanged median forecast for rates at the end of 2019 could even have been taken as a cue for bonds to sell-off. After all, everyone's talking about 3 rate cuts in 2019, so if the median Fed member sees the same rate cut probability as they did in March, we have issues, right? Looking beneath the rate forecast headline, we see a clear migration toward…(read more)

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MBS RECAP: Fed Threads The Needle as it Preps Markets For Policy Shift
MBS RECAP: Fed Threads The Needle as it Preps Markets For Policy Shift

MBS Day Ahead: 6 Years Later, Today's Fed Day Should Be a Bit Different

Posted To: MBS Commentary

In the day just past, bonds surged to the best levels since 2017, with 10yr yields coming within 0.002% of the lowest yields since Nov 2016. The key market mover was a speech from European Central Bank President Mario Draghi in which he essentially promised further monetary easing and rate cuts. Bonds lost about half the gains mid-morning following a Trump tweet about progress with China on a trade deal. In the day ahead, we'll turn our attention to our own central bank. The only major item on the agenda is today's policy announcement from the Fed. So much has changed since the Fed's last meeting (which happened right BEFORE all of the following: China trade war escalation beginning with Trump tweets in early May British PM May's resignation Mexico tariff tweets that pushed…(read more)

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MBS Day Ahead: 6 Years Later, Today's Fed Day Should Be a Bit Different
MBS Day Ahead: 6 Years Later, Today's Fed Day Should Be a Bit Different

MBS RECAP: Not The Central Bank We Were Looking For (But We'll Take It!)

Posted To: MBS Commentary

This week's big to-do had been and continues to be tomorrow's Fed announcement, press conference, and updated forecasts. The Fed's European counterpart threw a bit of a curve ball today as Mario Draghi unleashed a barrage of bond-friendly comments overnight with the gist being the essential guarantee of further easing from the ECB. Unsurprisingly, bonds enjoyed Draghi's little surprise . 10yr yields were pulled all the way down to 2.017% at the day's lowest levels. They looked willing to hold in that territory as well. It wasn't until Trump tweeted about promising trade talk developments with China that rates gave up roughly half their gains to end the day perfectly in line with the bottom of the sideways range we've been following (2.06% in terms of 10yr yields…(read more)

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MBS RECAP: Not The Central Bank We Were Looking For (But We'll Take It!)
MBS RECAP: Not The Central Bank We Were Looking For (But We'll Take It!)

Mortgage Rates Enjoy Surprise Drop Ahead of Fed Day

Posted To: Mortgage Rate Watch

Mortgage rates have generally been moving sideways for the past 2 weeks. This has accomplished a twofold goal of coming to terms with the strong gains seen in May as well as preparing for tomorrow’s hotly-anticipated announcement from the Fed. It has been and continues to be the case that any major surprises (or even minor surprises) from the Fed could have big, immediate effects on rates for better or worse. But just as the sideways momentum was about to lull us to sleep this week, central bank news from across the Atlantic stepped up to change the field of play today. European Central Bank (ECB) President Mario Draghi delivered a speech this morning in which he laid out the likelihood of additional stimulus measures including rate cuts deeper into negative territory. European bond markets…(read more)

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Mortgage Rates Enjoy Surprise Drop Ahead of Fed Day
Mortgage Rates Enjoy Surprise Drop Ahead of Fed Day

MBS Day Ahead: Unexpected Headlines Result in Bond Market "Lead-Off"

Posted To: MBS Commentary

In the day just past, bonds did absolutely nothing new or interesting. Yields continued to trade in a narrow, sideways range–one that has persisted for more than 2 weeks. The ostensible catalyst for a breakout was (and still IS, in some ways) tomorrow's Fed announcement (and press conference and economic projections). In the day ahead, we'll ponder what it means that bonds have managed to break out more than a day before the Fed's festivities begin. In fact, today qualifies as confirmed "lead-off" move. These happen frequently enough that we've created a primer on the topic in the MBS Live knowledge base ( here it is ). Long story short, bonds know the big pitch is coming in the form of tomorrow's Fed events, but for whatever reason, they're breaking out of…(read more)

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MBS Day Ahead: Unexpected Headlines Result in Bond Market "Lead-Off"
MBS Day Ahead: Unexpected Headlines Result in Bond Market "Lead-Off"

Mortgage Rates Stay Flat, But Risks Will Increase From Here

Posted To: Mortgage Rate Watch

Mortgage rates were only modestly higher today. Most lenders were still quoting the same rates compared to Friday with the only difference being slightly higher upfront costs. This means the rate at the top of the average mortgage quote is still within striking distance of the lowest levels since September 2017. Rather than focus on the journey that has already occurred for rates, it’s quickly becoming important to focus on the path ahead . Reason being: rates have generally been flat for more than 2 weeks now. This is incredibly uncommon given the pace of improvements in the several weeks before that. With the Federal Reserve releasing a policy announcement and updated forecasts on Wednesday (both hotly anticipated by financial markets), it seems clear that the sideways momentum in rates is…(read more)

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Mortgage Rates Stay Flat, But Risks Will Increase From Here
Mortgage Rates Stay Flat, But Risks Will Increase From Here

MBS Day Ahead: Housing Data and The Fed

Posted To: MBS Commentary

In the week just past, the bond market began by threatening to bounce toward higher rates after an impressive, 5-week rally to the lowest levels since 2017. The first sign of support appeared without any provocation other than "relatively higher yields." This is a good thing because it indicated traders were looking for an opportunity to step in and buy bonds without any additional motivation. They were looking to reinforce the range as opposed to ride a wave of momentum back to weaker levels. In the week ahead, the bond market will get a more compelling cue regarding a potential range breakout. If there's one event that stands out, it's Wednesday's Fed announcement . This is also one of the meetings that includes updated economic projections (i.e. Fed member rate forecasts…(read more)

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MBS Day Ahead: Housing Data and The Fed
MBS Day Ahead: Housing Data and The Fed

MBS RECAP: Modest Reactions to Econ Data as Bonds Wait For Bigger News

Posted To: MBS Commentary

Somehow, the bond market managed to end the week at 2.084% (10yr yield) which is exactly where it ended last week. In all my years of market-watching, I've never seen a sharp weekly (like the one we just had in late May) at the end of a sharp multi-month rally give way to 2 straight weeks of fairly flat trading in bonds. To say that this raises the risk of a very big breakout very soon would be an understatement. Today's data was no help in sussing out the direction of such a breakout. Strongly positive revisions to last month's Retail Sales numbers put only modest pressure on bonds early this morning. A huge drop in consumers' 5yr inflation expectations pushed back in the other direction by about as much at 10am. The rest of the day was spent moving perfectly sideways. When…(read more)

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MBS RECAP: Modest Reactions to Econ Data as Bonds Wait For Bigger News
MBS RECAP: Modest Reactions to Econ Data as Bonds Wait For Bigger News