Daily Rate Summary
Monday, May 22nd, 2017

Mortgage Rates Steady Treasury Yields Rise.
On Friday, Treasury yields and Mortgage Rates were unchanged after the six weeks of lower yields to usher in the spring home-buying season.  Credit markets have paused and the six week rally in bonds & lower mortgage interest rates has consolidated.  The 10 Yr. U.S. Treasury Note stood at a yield of 2.2346% and the 30 Yr. U.S. Treasury Bond yielded 2.8966%. 30 Year Mortgages according to Freddie Mac were around 4.02% for conforming and 4.59% for Jumbo products.

For now, the improvement in mortgage rates post Fed has come to a halt, with the Fed increasingly sticking to its commitment to gradual increases to the Federal Funds rate at the June meeting.  The door is still open for mortgage refinancing & home purchases as Mortgage rate continue to stay at low levels.  As I wrote in previous missives, the U.S. Bond market is serenely calm as to the future Debt Ceiling negotiations, Interest Rate increases, and signs of Inflation (they had that covered by punting until September fiscal year end).

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 15^th meeting by the Federal Reserve and its decision to hike the Federal Funds Rate by 0.25%.  The benchmark yield now stands just below 2.90%.

June Rate Hike Odds Rise above 85% then Fall (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 85% and 37%.  The market is currently discounting an 62% probability that the Fed will raise rates in June and keep to its espoused path 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.

If the long end of the Treasury yield curve refuses to rise even with 2 or 3 scheduled rate hikes its telling the Fed that rates are too high for the anticipated growth rate for the economy or the fall in commodity prices is telegraphing weakness in inflation expectations ahead.  Either way, higher long term interest rates may not last out the year.

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.

Federal Reserve Market Implied # of Rate Hikes for 2017 (Chart courtesy of Zerohedge.com).

The Federal Reserve’s current Market Implied # of Rate Hikes for 2017 has fallen recently to 1.42 from 1.60 two weeks ago; suggesting that macro-economic conditions are worsening somewhat recently and maybe not all the intended Fed Rate Hikes in 2017 (see dot plot) will be cashiered.

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 4.02% just in time for the Spring home-buying season.

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 126’06 / 32nds; the 10 Year Note was down 0.3 basis points (bps) on the day, yielding 2.2346%.  The US 30 Year Treasury Bond futures Contract for June settlement closed at a price of 153’27 / 32nds; the 30 Year Bond was up 1 basis points (bps) on the day, yielding 2.8966%.  Mortgage Rates were little changed on the day from the previous trading session.

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

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Disclaimer: The Information & content in this message is solely the opinion of the author and believed to be from reliable sources. Charts and tables contained herein were taken from other sources and a best effort was attempted by the author to give attribution where possible. None of this material should be construed as fact, and is not intended for use by reader as investment advice or relied upon for making financial decisions.