Mortgage Rates Slightly Better

Mortgage rates are slightly better this morning as the bonds and mortgage prices seem to favor such, but not much significant amount to jump up and down about.  Trump stirred the pot over the weekend with his immigration order.  Protests across the country on the severity of his executive order barring refugees from entry for 120 days and indefinitely prohibits entry for Syrian refugees. It also bars citizens from seven Muslim countries — Syria, Iraq, Iran, Sudan, Libya, Somalia and Yemen — from entering the US for 90 days. He did relax on green cards to refuse entry to permanent lawful residents of the country.

President Trump signed 17 Executive Orders in his first week. Now that we enter week 2, there will be more. Of importance is how he handles work visa programs that the technology sector relies heavily on. His comments and policies will have the largest impact on pricing. He has already signed an Executive Order this morning regarding regulations that is aimed at making it easier for small businesses to start up and operate with less red tape.

On Wednesday we get the Feds first action of the year. Their policy statement and interest rate decision will have a big impact on mortgage rates. However, the market is currently betting that nothing will happen at this meeting. Mostly because this is one of the meetings where there is no live press conference with Janet Yellen. While it very well may be that the Fed does not move to tighten again so soon after raising rates in December it’s a big mistake by pundits and traders to assume that no action can be taken absent a press conference as we have seen rate hikes announced in between Fed meetings before. This meeting is interesting as we usher in a new group of voting members that did not have a vote last year.

The market will of course focus on Big Jobs Friday where we get our Average Hourly Wages (currently up 2.9% YOY), Non-Farm Payrolls and the Unemployment Rate (currently 4.7%). But there are plenty of other big name releases this week with the gravitas to move mortgage rates. These include Chicago PMI, ISM Manufacturing and ISM Services.

Bank of America this morning calling for the 10yr note rate to climb to 3.00% by the end of the second quarter (2.49% now). Fed funds futures contracts are currently pricing in an expected two interest rate rises from the Fed this year and a total of four by the end of 2018 per the bank. The caveats - US fiscal stimulus not being as strong as expected, a downturn in equity markets due to overvaluations, and global growth slowing down due to concerns over trade wars and protectionism.

Between President Trump's actions and the heavy economic data week, we expect mortgage rate volatility to be very high this week. US stock indexes now falling back below that 20K psychological level. Valuations getting increased attention as well as what I believe has been an excessive jubilation over the Trump victory. Not much improvement so far in the bond and mortgage markets at 11:00AM, we are flat on the 10yr at 2.49% and very little change on the MBSs.