Mortgage Rates Digesting Positive Economic Data This Morning

Mortgage rates are trying to push upward again today.  Early this morning the 10yr was unchanged and the MBSs were in positive territory.  Then came 7:30AM with all the key economic data, and the tide turned a bit.

Housing Starts hit a 9-year high and beat expectations by a large margin.  More importantly, the Single-Family Residence chunk of the report grew by a whopping 10.7%.  Building Permits also beat market forecasts.

Initial Weekly Jobless Claims dropped to their lowest level in 43 years, as the more closely watched 4 week moving average fell to 253,500. Continuing Claims fell below 2M and were also much better (lower) than estimates.

With the Inflation data, the Core YOY CPI reading remained over the Fed's mandated 2% level (2.1%) for the 12th straight month and the Cost of Living rose the most since 2007. The Headline MOM CPI reading was higher than expected, even with the Core data (ex food and energy) lower than expected. Housing/Rent/Shelter moved up by 3.5% on YOY basis.

From the Empire Manufacturing report, we got another regional reading that was stronger than expected as the Philly Fed came in much higher than anticipated.

We are still hearing from the Feds, but as I always say, all they want is to be heard.  The more important speed will come from Fed Chair Janet Yellen who is testifying before the Joint Economic Committee in Congress. Her prepared remarks were released in advance this morning. She did not really make any type of effort to go against the market's assumption of a December rate hike but she also did not fully commit to one neither.

In her statement, she said "Were the FOMC to delay increases in the federal funds rate for too long, it could end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both Committee's longer-run policy goals" on inflation and jobs, Yellen said. "Moreover, holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and ultimately undermine financial stability."

She also signaled that rate increases would be gradual "the risk of falling behind the curve soon appears limited, and gradual increases in the federal funds rate will likely be sufficient to get to a neutral policy stance over the next few years."

I am not expecting to see a big move in mortgage rates today - but we could see some intra-day volatility.  The economic news today was very positive for the economy and we continue to put a little pressure on mortgage rates. Currently at 11:00AM, we see the 10yr has climbed up to 2.26% from the 2.22% open, but MBSs are steady and unchanged.