Mortgage Rates Quiet Today

Generally quiet today in the bond and mortgage markets as mortgage rates did nothing to move higher or lower from last Friday on average.  Most of the focus today on oil prices jumping on reports Iraq has a plan that will encourage cuts in production - a meeting today and tomorrow on what OPEC calls “a technical meeting”. The main OPEC ministers meeting is scheduled for a week from this Wednesday in Vienna. Crude up about 4.0% today. All four major U.S. equity benchmarks climbed toward record highs as oil jumped on optimism OPEC will agree to cut output. The S&P 500 Index, the Dow Jones Industrial Average, the Nasdaq Composite Index and the Russell 2000 Index rallied to their peaks together for the first time since 1999.

Treasury sold $26B of 2yr notes this afternoon as the auction was slightly better than last month’s 2yr but not as strong as the averages of the last 12 2yr auctions. There were no economic releases in the US today.

There was not much news from the Trump camp. A meeting with media occurred but it was off the record. The assumption is that the Trump people were going over how his presidency will be covered. There is no such thing these days as off the record - “leaks” will come out tomorrow.  

After the big increase in rates there still has not been any noticeable demand for the higher yields.  No recovery or retracements yet.  I still expect that will happen but we all must be careful.  A retracement may not occur until rates have increased more. Present sentiment is about as bearish in the bond market as we have had since 2011. The Trump win is seen as increased fiscal spending, increased federal debt and higher inflation with increased wages following. A bet that has substance but the timing is being highly exaggerated now. All of those expectations are far down the line. I believe markets are over playing the forecasts that may not even happen. Too much enthusiasm now but once again – do not fight the moment.

In summary, it depends if you want to gamble.  What should you do – and what should you hope for?  If you need to lock, do not worry – just lock.  This movement is stampeding, and it will stop – but when and where?  You can hope (as I am) that we get back under 2.25% on the 10yr.  Right now we are at the highest level in over a year.  If we can retreat back, then we know the run is over and rates might improve just a bit.  However – HOPE IS NOT A STRATEGY!