Mortgage Rates Has a Downward Spin


Mortgage rates continued their sideway pattern today with a downward spin. This is probably the blatant lack of underlying motivation in financial markets.  By that, I mean that we have not seen any obvious cause and effect relationships between news, economic data, and bond market movements.  Instead, bonds moved of their own volition.  While the move was modest, it was an improvement.
Stock indexes generally were also quiet but higher - as usual. Tax cuts still the hot topic but nothing new today. Tax cuts will happen, eventually.  However not at the pace that markets and most analysts expect these days. Cutting taxes as much as is being formed does not get an easy ride and before the plans are consummated the debates and rancor will keep markets edgy.
The 10yr note yield sitting on a very important technical level at 2.32%, likely going to take something that will bother equity market investors. Finding that something is not simple - as investors do not think about anything but buying regardless of the extended market values.  
There was no economic data today and very little this week to consider.
The Saudi purge being watched carefully as to what will happen to those the new Crown Prince believes to be guilty of corruption - so far not likely to have much impact on US equities but is driving crude oil prices higher recently. Crude the highest in the last two and a half years. The news stirred concerns of Middle Eastern money pulling out of global financial markets; so far nothing is happening. Meanwhile Saudi Arabia said today that Lebanon had declared war against it because of attacks against the Kingdom by the Lebanese Shi‘ite group Hezbollah. The situation increasing in intensity, need to watch this closely - a Black Swan event? No reason so far to believe that but in that region events change rapidly. Last Saturday there was a missile fired toward Riyadh but was intercepted.  
The rest of the week does not offer too much in terms of scheduled events that promise to stir volatility in financial markets.  That said, volatility could still come from UNscheduled events, especially if they concern any major announcements of progress on the tax reform front (House leaders are actively working on making changes to the tax bill that would increase its odds of making it through the Senate).  In general, successful tax reform is seen as putting upward pressure on rates, all other things being equal, but the extent of that pressure will depend on the details.

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