Mortgage Rates Aigain Higher Today

Mortgage rates are moving a little bit higher again today.  Early this morning, the 10yr note increased to its highest level since last May, and the fourth time it has hit 2.40%. Very significant that the note holds at 2.40% - if it moves above it, the bearish outlook increases. It seems like the Stock Indexes do not want to stop as they are on the upside again this morning.

The odds of the tax cuts have improved since last week when the Senate passed the budget resolution that increases the US deficit by $15 trillion over the next 10 years. The passage has increased the possibility that a cut in taxes will likely happen before the end of the year without the need for any Democratic votes, as long as all Republicans can get on the same page.

Over last weekend, Japan’s Prime Minister Abe won a landslide election that markets believe will keep the easy money coming in Japan. The Nikkei posted its 16th consecutive advance and Finance Minister Taro Aso gave some insight into how dependent policymakers have become on rising stock prices, noting that the market approves of the government's policies because stocks ‘went up' after the election. The US markets getting some support from the global markets, as many follow along with the US equity markets climbing almost daily.

No key data today. The PMI Composite Flash for October was expected at 54.8 as reported 55.7. This afternoon, Treasury will sell $26B of 2yr notes (5s tomorrow and 7s on Thursday).

Looking over all of the wires this morning, there is not much that has direct impact on rates, other than the usual these days - stock market advances. I do not take too much from the improvement in the DJIA 30 stocks over the last week, including this morning; but it cannot be completely brushed aside either. The broad market has quieted last week and so far this week, with not much movement in NASDAQ or S&P. That said, the bond market selling is following the DJIA and the prospects of a tax cut package yet this year; we still believe getting a deal passed this year, while not impossible, is a steep hill to climb, given the legislative agenda and the continual infighting within the Republican majority. So far this year, Trump is batting zero in major political initiatives.

Crude oil is increasing on comments out of Saudis that they are intent on reducing the oil glut and will keep pressure on OPEC members to keep the cuts intact that were initiated last November and due to expire in March. Crude at $52.30 this morning.

Once again today, I am not expecting too much movement in the rates, but the underlying movement we have seen in the past few days has been up.  We finally will get some economic news tomorrow, but nothing earth-shattering unless the expectations are highly missed.