Mortgage rates are better today than they were on Monday.
The Fed continues to be the primary focus for the financial markets. The price swings for stocks, interest rates, and other financial assets are hanging on the Fed’s every word. Yesterday, the minutes from the last Federal Open Market Committee meeting were released and they showed that there is much disagreement amongst committee members on when to end quantitative easing (QE), which is designed to keep long-term interest rates low.
Later in the day yesterday Fed Chairman Ben Bernanke delivered comments which the markets are interpreting to be friendly.
The quote everyone is is focusing on this morning is, “You can only conclude that highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy..”.
My outlook for QE is unchanged. I still believe (along with many other analysts) that the Fed will announce a plan for tapering QE at their September 18th meeting and will be completely finished with the program by mid-2014.
In other news, weekly jobless claims spiked sharply higher today. The report showed that 360,000 people filed for initial unemployment benefits when the markets were expecting 335,000. This is commonly a volatile number so unless next weeks release is also higher than expected it probably will not impact mortgage rates.
Mortgage-backed bonds are currently trading in the middle of a large technical trading range. Given the longer-term trend of rates rising I am hesitant to lock but there is no compelling reason not to float either. I will shift to neutral.
Current Outlook: neutral