Mortgage Rates in Tight Range - Nothing Really Anticipated to Change This Week

Mortgage rates are trending sideways this morning.  Slightly lower prices in MBSs and the 10yr note this morning thus far at 11:00AM, but nothing significant. Interest rates at the long end, including MBSs, have been unchanged for a month with minor blips but not trending either higher or lower. This week, liquidity will thin with the holiday and not much expected on the tax cuts. The House passed its version last week, and last Friday the Senate Finance Committee voted 14-12 in favor of sending the tax bill to the Senate floor. The Senate is expected to vote during the final week of November. Trading activity will begin to thin out by Wednesday noon and only second stringers managing the desks on Friday. Both the bond and mortgage markets will close early Friday.

Yesterday Pres. Trump indicated he would not oppose removing the plan to end the penalty for those who do not buy insurance, one of the keys in Obamacare. Ending the penalty is meeting with resistance from some Senators concerned that if the penalty is removed, many will choose to go without insurance, particularly young people who do not usually have many health issues thus leading to less revenue to cover older citizens. Trump changing his view, adding to the prospects the Senate bill will have less of a hurdle for passage.

This morning, October leading economic indicators, exploded to one of the strongest months we have seen in years. No reaction to the increase.  LEI is a composite of six various monthly reports that as we have noted have been better overall than markets were expecting.

There are two key data points this week - October existing home sales (Tuesday) and October durable goods orders (Wednesday).  Other than those two, markets are focused primarily on the tax cuts. Tax cut plans have and will continue to have, a dominant influence on markets. Tax cuts are a reality; only the details now that must be resolved. Democrats will not vote for any tax cuts - not because they do not think it necessary, all political. Markets concerned about the economy and the impact cuts will have on the economic outlook. Politicians concerned more about the mid-term elections next November.

90% of all trading over the last two months has kept the benchmark 10yr note between 2.40% and 2.30%, mortgage rates also locked in tight ranges. This week is not likely to move rates out of the range. Talks and comments from the White House and Congress over the tax bill(s) will get ink but not likely to have any real changes in rate markets or the stock indexes. The lack of inflation supporting the long end of the curve is making it easy to use the treasury markets as a hedge against anything that may go wrong in equity markets. What's happening overseas could play a more significant than usual part in the movement of mortgage rates this week.