Mortgage Rates Unchanged After Holiday Break

Mortgage rates were basically unchanged today as markets returned to full force following the extended Thanksgiving break.  Bond markets had been consolidating in a narrower and narrower range in the weeks leading up to Thanksgiving.  While it's safe to assume that we'll see a bigger move in the coming weeks, today was not the day it would start.

Markets are waiting for the Senate to pass its tax plans, expected on Thursday. Then comparing the two and working through a conference committee to resolve differences. There are concerns in the Senate that the bill being discussed has a few Republican Senators worrying over the increase in the US deficit (debt) in the plan, healthcare, and small businesses. Until the Senate passes a bill, the markets are likely to sit still.

October new home sales were released this morning. Even though it was not a bad report, and even though some of the numbers did “wow” some folks, it still was not enough to trigger optimism. Treasury sold 2s and 5s today.  The 2yr was soft but the 5yr auction did met with decent demand. Tomorrow the more important $28B 7yr auction.

We get more housing related data tomorrow, along with the Conference Board will report its November consumer confidence index. Also, the Oct US trade deficit, a key report for equity markets, will be reported in the morning.

Still not expecting much directional movement in the bond, mortgage, or stock markets. Equity prices have more than discounted the most optimistic view abut a tax cut next year. Mortgage rates should remain at or very near current rates.  The bellwether 10yr note yield is likely to decline from these tight levels but I am not looking for that in the near term.

Technically, I remain neutral for the near term for mortgage rates and the bellwether 10yr note. Stock indexes will likely hold and maybe edge a little higher given the underlying optimism. I do not see much movement in the bond and mortgage markets but if there is, it will be for higher prices and lower yields. Some are electing to float, and as always, only float if you can afford to me wrong.  We do have quite a bit of potentially high impact reports later this week including inflation and GDP data, but those reports do not come until Wednesday and Thursday.