Mortgage Rates Trending Higher

Happy New Year!  Mortgage rates are trending higher this morning.  Last Thursday and Friday the bond and mortgage markets improved with traders taking out insurance against the long weekend. The 10yr declined to 2.45%. Stocks lost ground last week as investors balanced positions and the DJIA could not breach 20K. Last week the dollar weakened against the 16 currency index. This morning the 10yr yield opened at 2.51%, the MBSs was getting hit hard, the stock indexes early this morning much stronger, and the dollar increasing. 

Today Congress returns 17 days before the inauguration. Now that the New Year has begun investors and traders return to the Trump rally, the bullish outlook for the US economy. I have noted previously the Trump bump may be one of biggest leaps of faith we have witnessed in years. No debate regulations will be cut, taxes will be lowered, inflation will be increasing somewhat, and government/private fiscal spending are likely. Investing in certain equities or indexes is the investment strategy now. The timing is where I am concerned.  This will not likely be quick or easy to accomplish those goals - leading to what will likely be very volatile markets over the next few months. Markets are believing economic growth in 2017 will be 2.0% to 3.0% better than 2016 GDP - very optimistic as far as I believe now. All of the positives that markets are presently expecting are going to take much longer to initiate than traders and investors currently believe. Since the election the only voices out there have been from Trump’s people, not much from the opposition or a number of Republicans that were strongly opposed to Trump. Is it too much, too soon, especially for a stock market many had judged to be expensive? A stronger dollar also looms over multinational US companies, offsetting cuts in taxes and regulation. 

Two data reports saw December ISM manufacturing index come out better than anticipated.  The same results came out with the November construction numbers also being better. WE also saw positive numbers in the Markit PMI.  This figure alone came out just as Europe’s numbers showed that they were in line or also above expectations. 

Crude oil increasing today on the strong dollar. The dollar very strong, the index +1.07 to 103.38.  The dollar last week was slightly weaker on end of year trading but now back to increasing. This week is employment week on Friday; in the meantime the December ISM indexes (manufacturing and services) are key data. 

Last week mortgage rates were very stable and moved lower.  Look for far more volatility today and this week now that we have most of the traders back and potentially market moving economic data for the week.  As I push the button at 11:00AM, I am pleased to see that the 10yr has dropped to 2.46% and MBSs, off by as much as 35BPSs, are now only down 15BPS.  With this information, I would tend to float at this time to see where they go the rest of the day.