The rate markets prior to 8:30
continued to improve. At 8:30 weekly jobless claims and
Jan durable goods orders were reported. Claims were expected about unchanged
from last week, as released claims increased 14K to 348K.
Most focus this morning is on
Janet Yellen’ Senate (Senate Banking Committee) testimony that will begin about
10:00 this morning. Her testimony was delayed by two
weeks because of inclement weather in Washington; in the meantime Senators have
the Jan FOMC minutes that the House didn’t have when she testified at the
Financial Services Committee. Should have a lot of questions trying to pin her
on the weather effects on economic improvements and how she views the economic
outlook. In the FOMC minutes there was discussion about increasing interest
rates sooner than what had previously been thought. Just discussions, no
serious debate that rates should be increased sooner than next year. As always
the Fed chair will reiterate that any rate decisions will be data dependent.
Yellen said this month that only a notable change to the outlook would prompt
the central bank to slow the pace of tapering.
In
the last four sessions the 10 yr note has declined 10 basis points in rate, MBS
prices +70 basis points in price. The technicals are bullish, the fundamentals as we know them today are
bearish to interest rates as long as the economic outlook is for continued
growth. Some of the recent decline in rates in the last couple of days is due
to the problems in the Ukraine. The key though for lower rates is in how the
stock indexes trade. Many now worrying the equity markets may suffer anther
decline, to protect against that some money moving into treasuries as a hedge
against the possibility When that concern fades interest rates will return to a
bearish outlook.
Keep a close eye on the market if you choose not to lock. I personally would take advantage of our float down policy in the event rates go down further.
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