Mortgage Rates Unchanged to Start the Week

Mortgage rates had a little better day but in all reality, the best bet is to call it as unchanged as any changes were minimal at best.  No market interested news from Pres. Trump’s foray into Europe last week.

The only data today, May consumer credit; overall credit was expected to have increased to $14.3B, as reported increased to $18.4B. Much of the increase is in autos and student loans, but it is important to look mainly at revolving credit (credit cards). Since the beginning of this year consumers have been cautious using cards, paying down prior debts. Credit card usage is not what it used to be as consumers still cautious regardless of those consumer surveys.

Tomorrow Treasury will auction $24B of 3yr notes, beginning a three-day borrowing cycle. Wednesday, it is a 10yr note that demand will be key.

Reading the comments from politicians about health care reminds all that politics in Washington remains as always. Nothing but gibberish from the mouths of both parties. It is dead -  and is not going to make any difference if they pass anything. The two carping parties have a hard time agreeing on anything and that in my view isn’t likely to change any time soon. I will be happy to recant if there is anything resembling a workable bill. No heath care bill, no tax cuts - but in Washington spin rules. Talk today, a tax cut plan will be achieved by September - no way that will happen in this contentious environment. 

Most all focus now is on Janet Yellen’s testimony Wednesday and Thursday. The Fed has made a point of beginning to reduce its balance sheet recently. The Fed also wants to continue to increase interest rates. Yellen, hopefully, will get some tough questions in the House and Senate committees; not expecting it though. Questions asked but no direct responses other than what the Fed has been saying for two months. US stocks over-valued even by the most bullish yet continue to hold. How much longer? Wish we and investors had an idea. Q2 earnings coming next week, so far earnings have been helpful to equities. If equities continue to provide better returns fixed income investments will not get much better, but I do not believe mortgage rates will increase much from current levels.  If they do now we will have to wait until October and November before rates decline. The problem faced now is, from what levels will rates decline? The answer my friends is written in the wind - political wind. When will the over-extended stock market capitulate? Coming soon to a market near you.

In summary, it may as well have been a 3rd day of the weekend as far as bond markets (which underlie rates) were concerned.  Trading levels have not moved out of their recently higher, narrower range since last Thursday morning.  That will likely change - if not tomorrow, then shortly thereafter.  The second half of the week has several bigger-ticket events that have the potential to create volatility for rates.  These include economic reports, bond auctions, congressional testimony from Fed Chair Yellen, and the constantly lurking risk of headlines out of Europe (the initial reason rates began moving quickly higher 2 weeks ago).