Mortgage Rates Steady Following Good Housing Report

Prior to the US open this morning the 10yr note traded down to 2.29% from yesterday’s close.  Similar to yesterday by the time trading began here the note once against backed down to trade unchanged and at 11:00AM, is up to 2.30% while MBSs are a positive 20BPS.  Yesterday the DJIA, NASDAQ, S&P and the Russell 2000 indexes all made new all-time highs and is continuing again this morning.

Crude oil put in a big day yesterday increasing $1.80 on comments out if Iraq that it is brokering a deal in OPEC to cut production. This morning in early trade crude was unchanged. OPEC is still in its “technical” meeting this morning setting up for the official OPEC meeting in Vienna next week. Can OPEC actually cut production and live with it for six months; we doubt it. OPEC is known for cheats and this time even if there is a deal cheating should begin within a few weeks after the cut is in place. The price of oil drives many markets; stocks, other, commodities and US interest rates. Increasing prices are seen as leading to increased inflation. And there are some views as the price increases consumer spending on other goods and services will slow. It would though take a huge increase to cause consumers to reduce discretionary spending.

Yesterday Trump asked his transition team to draft a list of executive orders signed by Obama that he could reverse on day one of his presidency. Not news though, he made that clear in his campaign that he would reverse most of them.

October existing home sales were expected to be down, but was up to the best total since February 2007.  Not surprising though is that inventories are down.  In fact, September’s numbers were revised even better than reported, but surprising, there was no initial reaction to the better report.  On the year, sales were up 5.9% from the same month a year ago. At Noon, Treasury will auction $34B of 5yr notes, as yesterday’s 2yr auction was nothing special, just OK.

Stocks making more new highs so far; the interest rate markets not much change. The selling has ceased but there isn’t any bargain shopping yet at these levels. Stocks and bonds on the Trump train, both trading on better economic growth, higher wages and increases in inflation next year. Tomorrow there are a number of economic reports including Oct new home sales. Just before Noon tomorrow, trading will begin to thin out for the rest of the week.

We started the day with very good housing numbers and oil staying in check.  Mortgage rates have been very volatile over the last two weeks.  I still believe we might see some movement today, however, there is a better chance we could see some stability at these levels.