Mortgage Rates Sideways Today

Mortgage rates are moving sideways today.  Yesterday the 10yr note yield jumped to a new high in this move up, at 2.53% (but did not hold) on news that the Saudis and other OPEC members would cut more production. The news shot crude oil up over $3.00. Then markets settled and at the end of the day crude oil was up $0.80; the 10yr spent most of yesterday declining from the knee jerk reaction to the crude oil moves. At the end of the day the 10yr ended unchanged at 2.47%. This morning at 11:00AM, the 10yr is at 2.48%.  MBSs are trading in a tight range and crude is up $ .20. 

More evidence small businesses are rallying around the incoming new administration this morning. The National Federation of Independent Business optimism index increased to its highest mark since May 2015 and above the 42 year average.  The largest gain was recorded in expectations of the economy to improve, which rose 19 points to 12, followed by expectations of higher real sales, up 10 to 11. Plans to create new jobs were up 5 points from October to 15 percent, the strongest reading since the recovery.

The only other data this morning came from November import and export prices came in close to expectations, and there was little reaction to the data.

This afternoon Treasury will auction $12B of 30yr bonds re-opening the bond issued in November. Yesterday’s 10yr was sloppy and demand a little weak. With the FOMC tomorrow and the current global adjustment to the Trump election demand for the 30yr is likely to be weak also.

The FOMC meeting is underway. Tomorrow the details with the policy statement, the quarterly forecasts of GDP growth and inflation forecasts, and Janet Yellen’s press conference. The Fed will increase the FF rate by 0.25%, but hearing a few voicing the possibility of 0.50% but that is highly unlikely.  The Fed is not ready to become that aggressive. The forecasts of future inflation, employment and inflation come each quarter; this time though it will include forecasts of the timing for the next FF increase and what the rate will be at the end of the next two years. The Fed’s forecasts over the last two years does not have a very good track record so I am not taking it as gospel as markets appear to do.

The remainder of the day is likely to be quiet in the bond and mortgage markets. Mortgage rates are likely to once again stay in a fairly tight range ahead of the Fed announcement tomorrow. The 30-year treasury auction is the only thing that could push mortgage rates higher today, but I am not expecting anything unusual.