Tax Day Interest Market Update

 Interest rate markets opened a little weaker this morning but still the 10 yr is holding well under 2.70% (2.65% at 9:00). MBS prices in early trading generally unchanged in early activity. The Russia/Ukraine situation is roiling a little but still has not set markets into any kind of major selling or buying treasuries. There is a big meeting coming later this week between all the parties and NATO members; Ukraine is calling for UN peace keeping troops but that will not happen because Russia has ultimate veto power. 

Janet Yellen speaking in Stone Mountain Georgia (Atlanta) said our big banks may need more capital, implying that banks’ source of funding may be at risk during a financial crisis. The Basil Committee on bank regs is suggesting more capital for banks is needed. Central bankers continue to sweat more capital for banks, we wonder why after the recent increases in capital that have pushed banks to avoid proprietary trading and about every other risk that might be conceived of. Are central banks beginning to worry they have no more real effective bullets to use if the global economy slips? Yellen said staff members at the Fed “are actively considering additional measures that could address these and other residual risks in the short-term wholesale funding markets.”  

Interest rate market are holding positive technicals but the bellwether 10 yr has very hard resistance at 2.60%; it functions as a brick wall when the yield falls. MBS markets also still hold positive technical readings but won’t have the impetus to improve much unless the 10 can somehow crack 2.60%. To do so in  the present environment it will take more selling in the equity markets. I remain very skeptical that the stock market can hold at these near record highs, however with nowhere to turn to make any kind of return the stock market does have solid support engineered by the Federal Reserve and other major central banks.

Presently the MBS and treasury markets are in what we can call limbo; not heaven and not hell. Becasue of this I am suggesting to lock your rate if you are closing in the next 10 days, but past that we may see some potential improvements in rates.. Either way it is a roll of the dice at this point.