Mortgage Rates Flat

Mortgage rates were mostly flat again today as we again had another quiet session, despite higher yields with the 10yr Treasury closing at 2.19% and negative MBS pricing. The stock market (indexes) once again were the focus with the DJIA and S&P making a new high. Many people are expecting new highs will continue as stocks remain the only port in the storm for most investors still hanging on the view the US economy will continue to improve.

This morning the stock market got a boost from Wm. Dudley, NY Fed when he said that the U.S. economic expansion is healthy and wasn’t worried by the flattening of the yield curve (10s minus 2s).

Beside the dollar trade that helps keep US rates from climbing, there is still some geo-political concerns. The US shot down a Syrian fighter over the weekend adding increased defense against ISIS trying to take Raqqa city. Now Russia is increasing its rhetoric talking tough. While now there is not a critical situation, it is the first time a US fighter has shot down a Syrian regime aircraft during the six-year conflict. China rumbling over its South China Sea expansion with the US showing increased naval presence in the area, and the North Korean hermits still building missiles. In the UK, another ‘terrorist’ attack killing another person. None of these is an immediate fear but together, as long as the fundamentals tilt toward US money inflows they are adding another reason.

There were no data points today – and tomorrow show nothing of direct trading influence. The first key data of this light economic week comes tomorrow with May existing home sales.

Today began the formal exit of the UK from the EU. The timeline is long, not expected to be concluded until Nov 2018. More time for the Brussel’s elites to meet, eat and drink.  

While I remain bullish for the wider perspective, I do not like the current situation in the bond and mortgage markets. I doubt interest rates will spike dramatically higher but the lack of recent improvements in yields appears to be lessening somewhat. The 10yr is testing its 20-day average and the momentum oscillators have lost their mo-jo momentarily. Right now, I am stepping aside and look for more support in the fundamentals, domestically and geo-politically.