Mortgage Rates Moving Higher Today After Irma

Irma has passed, North Korea did not launch another ICBM as was rumored. The dollar is improving and US and global rates increasing on the lessened drive to safety. US stock indexes are trending higher and there is no data to think about today – and the mortgage rates are moving upward.  The Treasury will begin this week’s borrowing, with $24B of 3yr notes at 9;00AM today, the 10yr on Tuesday and the 30yr on Wednesday - the total: $46B $10B, less than the last 3,10, and 30yr auctions.

MSCI All Country World Index, which tracks 2,400 stocks around the world, increased to new highs this morning on beliefs that damages from Irma will not be as severe as expected and that North Korea did not conduct another rocket launch that was expected over the weekend. Risk back on this morning, investors back to buying equities and shedding safe haven trades in sovereign debt and gold. The dollar stronger, the best gains in the last 10 sessions for the buck.

It is not the first time in my life that I am surprised - the amount of gains in global and US stocks this morning was not something I expected. North Korea still rattling sabers, and the impact of Harvey and Irma is still an unknown. Some gains were a possibility, but the magnitude of the moves in US and global markets in equities, currencies and interest rates is unexpected. The UN scheduled to vote on additional sanctions against North Korea today.  Not much in the way of economic data this week until Wednesday with PPI, and Thursday and Friday many key reports.

Volatility increasing, the reactions to the less-than-expected damage caused by Irma have driven stocks to levels I did not anticipate this quickly.  At 11:00AM, the 10yr is at 2.11%.  I did state many times recently that it would take a lot of bearish outlooks to drive yields lower from the lows we had last week. The next support now for the 10 is its 20-day average at 2.15%. The next concerns for investors are the debt ceiling and the still uncertain tax cuts that many are expecting. Next week, the FOMC meeting and what the Fed is thinking. Inflation still not in the picture, but low and unexplained inflation is still not fully believed by central bankers and most economists.

While I expect mortgage rates to drift a bit higher today and this week, I do not expect too high of mortgage rate volatility.