Mortgage Rates Barely Moved Today

Mortgage rates barely moved today.  While we have seen nearly a month of extreme volatility from one side or another, I could listen to some sports reports on the Baseball winter meetings in Washington DC, as that seemed to be where all the action was taking place – it was certainly not Wall Street.

With no movement in the bond or mortgage markets, and with the stock market slightly higher, it looks like everything is running soft and running out of gas on the Trump rally. Crude lower today but off its early lows this morning, oil down $1.06 from yesterday’s -$0.62 drop.

The U.S. economic data included an upward revision to unit labor cost growth for the third quarter, up over twice the estimates. Although inflationary markets did not pay much attention.

Even though it is only Tuesday, it seems like the markets are taking a breather. Stocks look soft now, the bond and mortgage markets also looking tired from the recent interest rate spike. Tomorrow we get information on how mortgage applications are going and in the afternoon, October’s consumer credit data with neither having much market impact. The dollar was stronger again today. 

The lack of volatility could be due to Thursday's scheduled announcement from the European Central Bank (ECB).  In short, this is the world's first likely opportunity to hear the ECB confirm plans to wind down its asset purchases - a move that would be analogous to the Federal Reserve's comments preceding the 2013 taper tantrum.  In the current case, markets have done much more to prepare for European tapering, but the announcement could nonetheless cause volatility for rates.

The Fed meets next Tuesday and Wednesday – and we are expected to see the increase in the FF rate for the first time in a year. Most of the focus will be the statement and what the Fed thinks now for more increases in 2017. Amazingly markets take the Fed at its word, even after years of missing forecasts or those rate increases.  If you remember what was stated at last year’s December meeting that they would increase rates four times in 2016 – nope.

In summary, mortgage rates were a bit quiet today after what we have been through in the last 60 days.  Overall this may look like a good sign, but we are still in an uptrend.  Rates are forming higher highs, and higher lows, and this is just not a good sign for us.  Defense should be your only play if you are about to close, as locking in makes the most sense.  Tomorrows announcement from the head of the European central bank may have a potential benefit for rates, but it may not, and based on the reaction to the referendum from Italy this weekend I would say very little is likely to help us until Mr. Trump is in office.  Remember the current trade that pushed rates higher was in connection to our new elected president and the theoretical policies that he may bring that would cause inflation.