Mortgage Rates Still Volatile - But Heading Lower

Mortgage rates are trending lower this morning.  Mortgage rate volatility remained high. Mortgage rates should hold the slight improvement today with continued volatility today and the rest of the week.  The OPEC deal, and how it unfolds, will be a major catalyst for the direction and volatility of mortgage rates.  The markets will be keeping a close eye on the domestic data as well.  Continued strength in the economic numbers will put further pressure on mortgage rates.

         

This week has a lot of key data to work through with Nov employment data on Friday and other first tier data between Tuesday and then. Not only data but OPEC will meet on Wednesday in Vienna - trying to get production cuts; it will fail however. New data from European oil company MOL out today saying demand for fuel in its markets is bound to fall. OPEC continues to get ink about a possible cut but it is highly unlikely, any attempt to cut production assuming a deal is reached will not last a month.

This may be the week that markets get off the Trump train betting on lower taxes, increased infrastructure spending, more profitable trade deals, and reduced federal regulations. Since Trump won the stock market has run to new all-time highs almost every day last week. (the DJIA on the announcement of his win dropped 900 points, the same reaction when the Brits voted to leave the EU; suggests markets remain touchy). Markets are excessively overdone and will pull back.

Worries about inflation pushing the dollar to multi-year highs. Not sure we buy the view inflation is about to explode - the Fed worries, fixed income investors worry and currency traders worry about a bout of inflation about to hit. That may be the case in the long run but there is little to worry about next year, inflation in 2017 is not likely to increase much. And I do not believe US economic growth in 2017 will match the present euphoria driving stock prices higher. This is the honeymoon for the Trump presidency outlook - it is not going to be a simple, easy or quick as markets are believing. Infrastructure spending will take at least two years to be implemented to have any major economic impact - too many EPA, state and local regs that will have to be hurdled. Once Mr. Trump is inaugurated in January politics will begin and all this present euphoria will be mired in debate. Trump cannot do everything with executive orders.