Mortgage Rates Uneven

Mortgage rates were a bit uneven today meaning that they wanted to change, but was trying to figure if it was heading in the right direction. That being said, nothing went right for the bond market today, with the S&P leading the way as it made a new all-time high since May 2015. Treasury sold $24B of 3yr notes that did not go well with demand soft. The NY Fed reported consumers’ expectations increased to the highest level since August 2015, and looking out ahead three years consumers believe inflation will increase to 2.9%. Talk is that the Fed watches this report for an indicator of where future inflation is headed. Inflation in January was the lowest on record. Not real sure, given our increasing lack of Fed accuracy, why they would look at what consumers think but that that is the story.

Britain keeps moving as Home Secretary Theresa May will take over as prime minister on Wednesday. The British FTSE 100 index climbed to bull market territory today. The British pound moved higher today on the PM decision. As for the exit vote, the uncertainty has ebbed substantially now, some investors and money managers actually becoming more bullish about the UK economic outlook.

Tomorrow Treasury will auction $20B of 10yr notes re-opening the issue in May. The 3yr was poor today but the action and demand recently has been at the long end, 10s and 30s; Wednesday Treasury will sell 12B of 30s.

In summary, it was reassuring in the bigger picture to see rates steady-to-slightly-improved even after Friday's strong jobs numbers.  Holding that ground meant there was less risk of an abrupt move higher in rates coming into the current week.  While we have indeed seen a muted move higher today, each move higher at current levels should make us wonder if we are due for a bigger push back toward higher rates.  I am keeping a close eye on the Treasuries as the 10yr climbed to 1.43% today.  Even though there is no direct correlation, it still goes to show that it is still a good litmus test.