Mortgage Rate Update September 11, 2014

Interest rates have risen this week by ~.125% across the board.

Next week the Fed will hold its regularly scheduled monetary policy meeting that takes place every 6 weeks.  On Monday afternoon the Federal Reserve Bank of San Francisco released THIS LETTER in which they state that “the public seems to expect more accommodative policy than FOMC participants.”  In other words, the public’s glasses are a shade rosier than the Fed’s.  In response yields rose on Tuesday.

However, the headlines are far from rosy.  Weekly jobless claims were released this morning and were higher than the markets were expecting.  Meanwhile, geopolitical story lines continue to support low rates.  President Obama announced plans to “degrade and destroy” the Islamic State.  With conflict comes uncertainty which drives investors to seek “safety”.  Need evidence?  In yesterday’s $21 billion US 10-year treasury auction foreign buyers bid on 53% of the new supply, the highest level since 2011.

From a technical perspective interest rates look ripe for reversal.  We have to be careful though.  Investors may be gun shy as we head into the Fed’s monetary policy meeting next week.  I will carefully float.

Current Outlook: carefully floating