Mortgage Rates Continues to Trend Lower

Mortgage rates are trending lower this morning as pressure continues in the stock market and the 10yr broke two near term technical resistance areas yesterday.  At 10:00AM, we are seeing the 10yr near the resistance line that I have been mentioning as it opened at 2.37% and is now at 2.35%, with MBSs again in positive territory at +28BPS.  In the last 10 days, we have had only one negative close.

Weekly MBA mortgage applications last week saw an increase in both purchases and re-finances +2.0%, even though this has slowed down to the lowest level since June 2009.  Continuing strength in the volume of purchase applications points to increases in impending home sales.

Yesterday afternoon the Fed released December consumer credit data.  Even though the data came in close to what was anticipated, most do not give the total credit too much focus, as interest is on the revolving credit total (credit cards). Revolving credit in November increased $11.8B, in December consumers did not use credit much, up just $2.4B. Softness suggests and confirms other data that consumers still cautious with their use of credit.

Crude supplies rose by 14.2 million barrels last week, the American Petroleum Institute said yesterday. Government data today is forecast to show stockpiles climbed for a fifth week. Oil output from the U.S. will surge next year to the highest level since 1970, per updated estimates from the Energy Information Administration. OPEC unable to control oil prices, we said last Oct crude oil supplies will continually out-pace demand for the near future.

This afternoon, the Treasury will sell $23B of a new 10yr note. Yesterday’s 3yr was not strong but there is more concerned with the 10yr today and the 30yr auction tomorrow.

Finally, the 10yr has positive momentum; the 9-day RSI (Relative Strength Index) is now positive and the longer-term trend line has been broken. Looks good but still has technical resistance at these levels. 2.35% has stopped recent improvements. 2.30% has been the intraday low since back in November after the election. As I mentioned before, the stock market is increasingly looking soft and the reason for this morning move as the key indexes lower. After the Trump enthusiasm investors and traders re-thinking many of the elements that set off a very optimistic reaction to the Trump platform, realizing now that all those positives will not take hold this year.

I am suggesting to float at this time unless you are closing in the next 15 days, then wrap up these gains and be happy that you did not fold – and take care of the ulcer that may have churned in your stomach a bit.