It was ground-hog day again for mortgage rates but tomorrow is certain to be a new day with the Fed announcing it's 99% expected rate hike at 2pm. A .25% hike is what we will see.
The markets are ready with the Dow rising to a new record high as they have built in the .25% hike with Goldman Sachs, which is ready for higher revenues on higher rates leading the way. But the positive tone in the markets also mean that they don't believe that the Fed will be able to hike again this year. The feeling is that the Fed will remain cautious about future hikes and not hinder growth. Inflation is also below their 2% target rate.
Last year the Fed threatened to raise rates four times but ending up hiking only once. Traders believe that this will happen again in 2017.
The bond market also agrees with this predicament. The 10-year bond yield has remained steady so far this week trading at 2.20%. If the bond market believed that more hikes were in the cards, yields would be higher than they are.
This doesn't mean that tomorrow will be smooth sailing. There are generally more dramatic moves right after the announcement and Ms. Yellen's remarks not only on Rate increases but also on how they intend to unwind their balance sheet.
After all the initial fireworks, I say that rates will be still go lower…OK readers, there I said it! Stay Tuned!!