Very carefully float

The Federal Reserve announced the results of their two-day meeting today. As expected, there was no change to short term interest rates. However, the Fed did signal that they are open to a rate hike at the next meeting scheduled for June.  They sited improvement in the global economy and downplayed recent signs of weakness here at home in the US. In fact, they eliminated language stating that “global economic and financial developments continue to pose risks,” instead saying officials will “closely monitor” such developments.  With employment conditions clearly continuing to improve, the probability of a rate hike in the coming months is certainly increasing.  Although the odds are increasing, it is still an unlikely outcome for months to come. 

Stocks have been dragged down a bit today, led by weak earnings reports from Apple, Twitter and Chipolte.  Mortgage bonds are benefiting from the weakness in stocks and the overall dovish tone of the Fed statement.  With the Fed statement behind us, investors are feeling a bit more willing to place bets on the bond market once again.  The 10 Year Treasury Note yield is again below the 1.9% level we have identified in recent market updates.  This is a great sign for mortgage interest rates, and a hopeful indicator that bonds have found their bottom.  If that is the case, we can expect to see further improvements in days to come.  We will have to wait and see.

With bonds improving today, there is no rush to immediately lock.  However, watch the markets closely.  Sentiment can reverse quickly.