Mortgage Rates Again Flat - No Data to Analyze

Overnight we saw the 10yr note slightly higher than 2.20% which is an area where we did not want to go back into if we anticipated rates to fall further.  However, by the time the markets opened, the 10yr came back to where it ended last night.

With no data again for today except for the Q1 current account deficit (which came in better than anticipated), is a report that really does not make much noise.  

Chicago Fed President Charles Evans (voting member) said (last night after the bond market was closed) that "I don't see why we would not be served to allow more time to wait" before raising rates again. This still appears to be in line with one more hike this year, but not by the September meeting.

Vice Chair Stanley Fischer (voting member and number 2 at the Fed): Primarily addressed the housing financial system after the last implosion and did not address his economic outlook or rate path.

Boston Fed President Eric Rosengren (non-voting member) also did not specifically discuss his economic outlook or rate path. However, he did discuss the risks to the financial markets and economy of keeping rates too low for too long.

… and now you know why I do not like their speeches between meetings as it is all a bunch of media grabbing scoundrels looking to be heard and read – just as I have done here.  Dallas Fed President Robert Kaplan (voting member) will speak at 3:00PM EDT today.

Crude oil continues to fall, a plus for the long end of the curve, because as crude goes, so go the inflation concerns. Very little inflation now, but the Fed and its many Fed regional presidents continue to sweat inflation. Recently they had to face the reality that prices are not increasing and wages are only moving higher in tiny amounts. The old standard that economists continue to cling to, that 4.3% unemployment is sure to drive wages higher, has to be reconsidered in this ‘new normal.’ Crude early this morning at a new recent low down $1.14 from yesterday to $43.06 at 8:00AM.  Today’s decline has lit up the financial news media. Most have forecasted that crude would fall. Now at these levels, the cost of production will be tested.

Media and politicos are focusing on the congressional elections in Georgia and South Carolina today. Trump picked Republicans in the two elections to fill cabinet posts, now the elections are viewed by politicians as the first test of Trump’s presidency. Democrats, according to what we read, have raised $23M in the election in Georgia making it the most money ever for a congressional election. The total spent on the Georgia and South Carolina campaigns are estimated at $60M.

Marking time, looking for some reason to move either up or down; the bond market remains longer term bullish, but as long as equity markets continue to make new highs, the demand for more bond purchases ebbs somewhat. That said, so far the strength in the bond and mortgage markets continues to surprise many. No inflation fears, a soft dollar and increasing concerns that equity markets are still very over-valued. Of all, the biggest driver in the US bond markets is the weakness in the dollar. As long as foreign investors take advantage of the weakness and trade strong currencies for weak ones the bond market in the US will benefit and US rates will continue to be seen as low.