Mortgage Rates Moving Sideways Today

Mortgage rates are moving sideways today after a huge global stock market rally yesterday with only the UK stock market in the red. Relief that Irma did not do as much damage as expected and relief that the North Korea tensions have momentarily ebbed.

The UN, as expected, added additional sanctions against North Korea - not as strong as the US wanted, but will add to penalties for continuing its belligerence, building and testing nuclear weapons. Kim Jong-un once again told the US it would soon face the “greatest pain” it had ever experienced. The sanctions ban the export of textiles and caps imports of oil. The US had wanted a more severe cut back on oil imports, but Russia and China opposed it. Russia is saying stiffer sanctions now would not leave much room for more sanctions later. NK officials accused the U.S. administration of being “fired up for political, economic, and military confrontation,” and of being “obsessed with the wild game of reversing the DPRK’s development of nuclear force which has already reached the completion phase”.

The on again, off again, fears over North Korea continue to roil global markets. Even the rhetoric from NK officials doesn’t reignite the fears, at least for the moment. When the fear lessens, the bond and mortgage markets see prices fall. When fear increases, prices increase (lower rates). The same in the equity markets in the US and globally. North Korea appears to be stepping up efforts to secure Bitcoin and other cryptocurrencies, which could be used to avoid trade restrictions, including new sanctions approved by the United Nations Security Council yesterday.

The CoreLogic HPI Forecast indicates that home prices will increase by 5.0 percent on a year-over-year basis from July 2017 to July 2018, and on a month-over-month basis, home prices are expected to increase by 0.4 percent from July 2017 to August 2017. The CoreLogic HPI Forecast is a projection of home prices using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.

The July JOLTS job openings, expected at 6.01M from 6.163M; as reported 6.170M.

The small business optimism index rose 0.1 points in August to 105.3, matching the highest level since the 12-year high set in January. Beating consensus forecasts calling for a small decline from the also surprisingly strong July reading, August's optimism reflected increases in the proportion of small business owners planning capital expenditures and anticipating higher sales. Capital expenditures plans in the next 3 to 6 months reached their highest level since 2006, the NFIB said.

At Noon, Treasury will auction $20B of 10yr notes, reopening the issue from August. Yesterday the 3yr auction was weak -  sloppy, and foreign interest in it was poor.

Technical reads on the 10yr have weakened after the big movement yesterday. Currently testing its 20-day moving average, our models that have been bullish for weeks now at neutral. Momentum oscillators turning neutral from bullish.

No chance interest rates will improve today as long as the equity market indexes continue to improve and NK isn’t launching missiles. It will take an unexpected strong reversal for MBS prices (and rates) to improve now. I cannot say it enough - for these current low yields to work lower, it will take an extremely big decline in stock indexes and/or NK or anything else that lights up fear.