Mortgage Rates Sideways - Waiting for the Beige Book

Mortgage rates are again moving sideways as the 10yr note has been blocked at its technical resistance at 1.74%.  MBSs are basically even.   Early this morning MBA weekly mortgage applications are still down as the refinance boom has subsided a bit, but purchases have not increased to the higher levels as most would want to see.

This morning’s data showed a miss in Housing Starts which were expected to be at 1180K units.  Starts declined to 1047K down 9.0%. Building permits expected at 1165K units, as reported 1225 an increase of 6.0%. the drop in starts is due to the volatile multi-family component where starts fell a massive 38%. The more important single-family component is up sharply, 8.1% higher to a 783,000 rate. Single family permits up 0.4% to 783K units (annualized); multi-family permits in Sept increased 17% to 486K. The headline looks weak but do not discount what I see as a good number in single family; multi-family starts are likely to remain soft as many markets are now approaching over building of apartments and condos. In short, it was a positive report on housing and put a little pressure on the 10yr and MBSs.

In the UK, Prime Minister Theresa May said today at the Questions session that the government is exploring trade deals with the Commonwealth. May reiterated that the June 23 referendum was a choice to ensure control over movement of people to the U.K.

The dollar has strengthened the last two months but recently has stopped increasing. This morning the dollar index is unchanged at 97.89, dollar a little stronger against the euro currency, weaker against the yen and unchanged against the UK pound. I cannot stress it enough - the dollar is key right now.

At 1:00 this afternoon the Fed will release its Beige Book - the Fed staff’s report on the economy from each of the 12 Fed districts. An interesting read for details from each region. It is supposedly used by the FOMC at their meeting but I doubt it gets that much focus with a lot of data between now and the November meeting on the 2^nd - nevertheless markets do pay it attention.

Crude oil today has broken the $51.00 level - a concern about inflation if the price continues to run higher. OPEC scheduled to meet in November, continuing to talk about cutting output. Russia and Iran also talking bullish on oil. As crude increases it is a concern for fixed income investors if it pushes inflation expectations up. Not news that the Fed is thinking an increase in the FF rate at the December meeting.

The last mud fight is on tonight at 8:00 pm.