Mortgage Rates Heading Up - Still In Tight Range

Mortgage rates are moving higher so far today, but still in the tight range we have seen now for some time.  The MBS market came back from Friday’s losses, but unfortunately, it looks like it has retreated towards Friday’s numbers again.  So far at 11:00AM, we see MBS has lost 28BPS.

The 10yr once again could not be sustained below 2.35%, yesterday’s close 2.32%, as it is now at 2.37%.  It is all about how the dollar trades these days - the dollar was increasing in huge moves since the beginning of the year. Yesterday the mouth from Trump Tower commented he wanted a weaker dollar, traders responded like lemmings and pushed the dollar down and the stock market down a little yesterday. This morning the dollar is gaining strength.

Weekly Mortgage Applications increased by 0.8%, led by Refinances which jumped 7.0%, but Purchases fell -5.0%. The NAHB Index hit 67 which was 2 points lower than November's downwardly revised 69. Any reading above 50 is positive and a reading in the upper 60s is very robust.

The December Consumer Price Index matched expectations across the board. The key is that both the headline YOY (2.1%) and core YOY (2.2%) are both over 2.0%.

Industrial Production was twice as strong as expected - but not so fast. Most of that beat is due to comparing the December data to November's downwardly revised negative number, so it is skewed higher. Regardless, it was still a nice reversal from November. Capacity Utilization edged out estimates by a slim margin.

We get the Fed’s Beige book at 1:00PM that is prepared by the 12 districts to be used at this month's Fed policy meeting. We hear from Fed Janet Yellen at 2:00PM.

Short of unexpected comments from Janet Yellen, we expect mortgage rates to trend in the same very tight range. Watch it carefully if you are still floating