Mortgage Rates Did Not Move Today

Mortgage rates did not move again for the third straight day as there was not anything for the markets today to move on one way or another - lots of various news but nothing that changed the bond and mortgage markets much. The dollar is now at a 14-year high as the US is raising interest rates and the rest of the world still stimulating with QEs and buying of bonds, setting the deposit rates below zero. Since the Trump vote last month US stocks have been on fire while interest rates are climbing higher. All in is the motto now for equity markets, talk still circulating that the small investor has yet to fully commit and that there is a lot of money on the sidelines.  

In light trading, the greenback strengthened against major currencies with the rise in U.S. Treasury yields after Yellen said yesterday that the U.S. labor sector was at its most robust in almost a decade, suggesting wage growth is picking up. The dollar index, which gauges the greenback's value against a basket of currencies, was up over 0.1% at 103.31 after hitting 103.65, its highest since December 2002. The BofJ today affirmed its twin targets of minus 0.10% interest on some excess reserves and a zero percent 10-year government bond yield.  

The stock market and almost every breathing investor and analyst are completely convinced the US economy is on the verge of substantial new growth. Fiscal stimulus, tax cuts and wage increases - could it get any better? One problem according to comments recently by Janet Yellen, the economy is "in the vicinity of full employment", with less workers and cutbacks in immigration the potential spike in inflation becomes a critical issue. There is a debate that increasing inflation will drive the Fed to tighten even more than what it is currently expected (three hikes next year).  After eight years of political gridlock markets are like children on Christmas morning, too excited to look beyond the gifts.

Tomorrow we finally get some current information.  Although with the Trump rally what is occurring economically now is less of an issue than what is expected to happen next year…unless the present data exceeds market expectations for growth. Tomorrow we will see November existing home sales expected to be down from October’s figures.

The DJIA did not quite make it today, falling short of 20K - this gets more media attention than what traders see. A nice psychological level that may encourage consumers to go all in to equities abandoning savings that have not generated any returns.

In summary, short of some unexpected tape bomb, it will be extremely difficult for bonds to mount any kind of sizable rally that will lower rates.  The trend continues to not be our friend.  I am advising clients to lock as soon as they are able to as there appears to be no near term factor that makes floating worth the risk.