Daily Rate Summary

Rally Continues in Treasury Yields & Mortgage Rates.
On Monday, Treasury yields and Mortgage Rates continue their rally post fed rate hike. This is now five days in a row of better pricing when compared to previous trading. On Tuesday, the 10 Yr. U.S. Treasury Note yielded 2.3661% and the 30 Yr. U.S. Treasury Bond yielded 2.9903%. Previous week, 30 Year Mortgages according to Freddie Mac were around 4.10% for conforming and 4.49% for Jumbo products.

Post Fed the whole U.S. Treasury yield curve is flattening in response to last Wednesday's expected Federal Reserve rate move. Long dated Treasuries are being strongly bid up as investors see a bargain in the higher yields that occurred in the run-up to the Fed meeting. The Bond market is acting unfazed by future Debt Ceiling negotiations, Interest Rate increases, and signs that Inflation is heating up (see chart below).

30 Year Treasury Yields Have Fallen Below 3.00% (Courtesy of Zerohedge.com)

30 Year Treasury Bond yields have been falling consistently since the March 15th meeting by the Federal Reserve and its decision to hike the Federal Funds Rate by 0.25%. The benchmark yield now stands below 3.000%.

June Rate Hike Odds Fall to 37%
(Chart courtesy of Zerohedge.com).

As displayed in the Chart, the odds of a June Rate Hike by the Federal Reserve have been volatile during the past few weeks oscillating between 50% and 37%. The market is dis-believing of the Fed's commitment to a gradual pace of tightening in the Federal Funds rate, even though its own updated Implied Fed Funds Target Rate (Dot Plot) still shows two or three increase in 2017.

Implied Fed Funds Target Rate (Dot Plot)
(Chart courtesy of Zerohedge.com).

The so-called Dot Plot suggests that the Fed Funds Rate will be 1.75% by the end of 2017 which indicated two additional rate hikes this year.

U.S. 10 Year Treasury Note Yields are Falling
(Chart courtesy of Zerohedge.com).

The 10 Year Treasury Note is now over 30 bps lower than at the time just before the Fed's last meeting in March, this would seem to be counter-intuitive to the proposed path of interest rates, but suggests a correction was in order due to a crowded trade.

Weekly Mortgage Rates Analysis

As can be seen from Freddie Mac's Mortgage Market Survey, last week, 30 Yr. Fixed Mortgage rates for conforming loans hit 4.100% due to dovish Fed Governor comments about the pace of future rate hike and possible pause for balance sheet reductions.

Treasury Prices Rise and Yields Fall for U.S. 10 Yr. and 30 Yr. Treasuries.
On the Chicago Board of Trade (CBOT): the US 10 Year Treasury Note futures Contract for June settlement closed at a price of 124'29 / 32nds; the 10 Year Note was up 3 basis points (bps) on the day, yielding 2.3661%. The US 30 Year Treasury Bond futures Contract for June settlement closed at a price of 151'25 / 32nds; the 30 Year Bond was up 9 basis points (bps) on the day, yielding 2.9903%. Mortgage Rates were lower on the day from the previous trading session.

Thanks to ZeroHedge.com and FreddieMac.com for Charts and Graphics.

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