Mortgage Rates and 10YR Treasury Note Up

Mortgage rates are on the increase this morning.  Yesterday the bellwether 10yr rose to 2.42% breaking a very important support level at 2.40% that had been holding increases going back to last May. This morning in early trading, the 10yr was at 2.45%, but within the last hour at 11:00AM, has improved to 2.43%.  This might be a slight reprieve, but it does not look good down the road.

Weekly MBA mortgage applications were soft, as applications were down 4.6%, purchase apps -6.0% and refinance apps -3.0%.

September durable goods orders up 2.2%, yr./yr., blowing past expectations, and with this rise in inventories, will be another plus for GDP. Shipments which are direct inputs into the business investment component of the GDP report, are building momentum with monthly gains of 0.7% in September following 1.2 and 1.0% gains in August and July.

August FHFA home price index expected up 0.4% increased 0.7%; yr./yr. prices up 6.6%. September new home sales were up +18.9% to 667K. The forecasts were for -0.9% to 555K. It was the strongest increase since just before the home market collapsed in November 2007. An amazing miss, there must be something unusual driving this report.

At Noon, Treasury will auction $34B of 5yr.  Yesterday’s 2yr auction was weak in demand, with sloppy bidding.

Will we get the promised tax cut that equity markets are widely believing will happen this year? Getting messier almost daily with Washington infighting. One debate: will the proposed tax cuts increase the US debt? Some say economic growth that will increase the tax revenues will offset the cuts, others say it will not and that the anticipated economic growth will not meet the forecasts that are being estimated. House Speaker Paul Ryan told Reuters in an interview on today that it is unlikely to trigger a big deficit expansion because it will spur more investment and job growth.

Overall, the bond and mortgage markets are moving to higher rates, the break of technical support on the 10yr at 2.40% did not bode well.