Mortgage Rates Quiet This Morning - 10Yr at 2.46%

Very quiet early this morning as the year ends this afternoon. Yesterday the US expelled 35 diplomats and shut down two Russian compounds in Maryland and NY. Expected that Russia would retaliate but Putin has decided to not expel US diplomats in Russia. Looks as if he will wait for Trump. There was no reaction in any markets yesterday when the US announced the decision, and even though the plane has landed from Russia to take the individuals back home, we are still not seeing any reactions this morning.

Most of the news this morning directed toward the outlook for 2017. Trump is a true anomaly in Washington, a business man with no political experience. Will he listen and take the advice of those he has brought into his “team”? From that question, it leads to all of his promises - lower taxes for middle incomes, lower taxes for corporations, chopping regulations that most believe are way too many, successfully negotiating better trade deals, keeping jobs here and companies hard to leave the US. The list goes on - ObamaCare and changes to Medicare that will increase costs to seniors and all others. Going into 2017 with a new Republican leadership is not as easy and will not be the slam dunk the world seems to expect now.

The last economic report of 2016, the December Chicago Purchasing Managers Index, dropped more than anticipated. No biggy though, still better than at the beginning of 2016. New orders continued to expand but at a slower pace. Backlog orders moved back into contraction, production slowed, while employment held steady. Input costs rose in the month, driving prices paid to a higher level - which is consistent with moderate inflationary pressure.

I do not expect much movement today, even though I am pleased to see the 10yr heading down and is at 2.46% and MBSs a positive 16BPS (it was higher earlier) at 11:00AM.  The Bond Market will be closing in a few more hours at 1:00PM, and the markets will drag on with normal hours.  Ridiculous.  All markets are closed on Monday.