Mortgage Rates A Little Weaker This Morning

Early today the bond and mortgage markets began a little weaker after the roller coaster ride we had yesterday.  This morning normally, we would see ADP’s December private jobs data but with Monday a holiday ADP data will not hit until tomorrow. What was reported was the weekly MBA mortgage applications. The average interest rate on 30-year fixed rate conforming mortgages halted its steep climb higher and was down from the prior week, of which I have been stating in my reports.

December auto and truck sales and the release of the FOMC minutes from the December meeting is all there is now on the schedule the rest of the session. There were several economic releases from Europe and Japan that were mostly better than market expectations.

The dollar taking a breather this morning after increasing yesterday. Consensus within markets and with currency traders is the dollar will continue to increases, most believing the dollar will increase to parity against the euro currency (now $1.0439). Dollar strength a plus for US stocks but it has its downside; US manufacturers will have a more difficult time marketing US made goods on the global markets.  

Other than better data from Europe there is not much fodder for markets today. Trump is still tweeting - Republicans in the House weakening the independent Office of Congressional Ethics, which oversees investigating ethics accusations against lawmakers, does not look the swamp is being drained as Trump campaigned on.

Most issues now pointing to higher equity markets, higher interest rates, increasing inflation and a huge cut in US regulations that businesses are saying have hampered growth over the last four years. There is not much presently that is negative but every element of data or news is based on expectations Trump and Republicans can achieve the goals that Trump espoused in his campaign and currently on his tweet account. To me, it seems that now there is a lot of optimism that will be a steep hill to climb within the rapid time frames investors now expect. Congress is not known for its speed in making these kinds of major changes - even if all the expectations are met GDP growth is not likely to increase to 3.0% or 4.0% currently thought in 2017.  

Interest rate markets bearish for the long-term outlook, near term the momentary technicals are neutral now. The 10yr improved recently but has found resistance at its 20-day average at 2.47%. The stock market will rule rate markets today as was the case yesterday. Stock indexes have made major moves betting on Trump and Republicans, too much too quickly in my opinion. Look for equity markets to struggle a little now although the outlook remains bullish as investors and traders put a huge amount of faith in 2017.  

At 10:30AM as I press the submit button, the 10yr is at 2.46% and MBS have been negative all morning, but in a tight range at a negative 14BPS.  Right now, I would float but this is Jobs Week, and I am always fearful of what that report brings out.  The conservative approach is to lock, but if you are floating – stay alert.