Mortgage Rates Are Not Moving Much Today

Mortgage rates are sideways today after what has been a slow reversal in the rate markets in the last week.  So far today, the bond market and the 10yr have not moved much (if any) with the US stock indexes slightly lower after two days of strong buying. There are no key data point today, but early this morning, as usual, we got the weekly mortgage applications from MBA. Overall apps increased 2.7%, but it was all in refinances, as purchase apps were down.

Today Trump is going to release his framework for tax cuts, focusing on businesses and corporate cuts that have been touted as huge cuts for small businesses. Personal tax cuts are not likely to be completed anytime soon, maybe not until the end of the year at the earliest. The corporate cuts are thought to reduce income to the government by $2.2 trillion over ten years. Everyone champions tax cuts but there is a limit if deficits are to be considered. There are too many in Congress, Republicans and Democrats that will resist the Trump’s tax cuts. Tax plans will be a significant debate through the rest of this year, as most do not expect any actual legislation until later this year. Tax cuts and tax revisions are complex, as this will require a lot of time and disagreements in the political world.

The government is set to shut down if the present debt limit is not extended. Trump withdrew his demand for money to build The Wall, making it easier for Congress to temporarily increase the debt limit and keep the government functioning. This will likely get done without government closures. The biggest lingering question now is whether the spending bill, which is needed to keep the government running after its current funding expires at 12:01 a.m. Saturday, will include payments established by the Affordable Care Act to help insurers offset the cost of subsidies for low-income customers.

Tomorrow the European Central Bank will meet.  Europe’s economies are improving allowing the ECB to begin withdrawal from their stimulus package as the US Fed is doing, with the talk of two more rate increases for the Federal Funds rate this year. In that regard, while the Fed continues to talk about it, it is still unclear and is dependent on US growth through the rest of this year. Most Fed officials end their remarks about increasing rates with the comment that it is ‘data dependent.

Earnings are generally better than expected so far and driving equity markets higher (indexes).  Money is moving back into risk, turning the bond and mortgage markets lower (higher mortgage rates). Right now, the trend is not our friend. Mortgage rates will be focusing on the reveal of President Trump's tax plan. If there are a lot of details and significant cuts, mortgage rates are likely to head higher. If the tax cuts are not as deep or there is not a lot of detail, we are liable to see mortgage rates move slightly lower.