We shifted our outlook to floating on Wednesday and today rates have improved slightly.
The cause for the moderation in rates?
First, mortgage-backed bonds were able to gap higher this morning likely because of technical trading patterns which we mentioned in yesterday’s rate update.
Second, the Commerce Department released the monthly Personal Consumption Expenditure (PCE) report this morning. Embedded in this report is the PCE price index which is the Fed’s favorite gauge of inflation. The PCE price index showed declines of year-over-year inflation which is a positive sign for mortgage rates (top understand why inflation and interest rates are correlated click this link ).
We remain in a floating position with the hopes that mortgage-backed bond prices will continue to rally.
Current Outlook: floating