Mortgage rates worsened following yesterday’s release of the minutes from the most recent Fed meeting. Have the markets overreacted?
The chart below shows the yield on the US 10-year treasury yield which increased sharply yesterday (mortgage rates followed suit).
Why this reaction? The Fed meeting minutes signaled a possible Fed rate hike as soon as June (Fed meeting scheduled for June 14-15th). However, in my view I do not believe this will happen. The last Fed meeting took place in April before the most recent monthly jobs report was released. As a reminder the most recent jobs report was weaker than expectations making it less likely that the Fed will hike rates.
I went into this week with a locking recommendation and that has proven to be the correct call. Given that I believe the markets have overreacted to the release of the Fed meeting minutes I am going to shift back to a floating stance.
Current Outlook: floating