Mortgage Rates Again Moving Higher

Mortgage rates are moving slightly higher so far today.  The MBS market did not far to well yesterday, and after we got this morning’s first bit of data, they continued to follow the same direction that they have for the past week.

Can you say Inflation? We got another round of data that shows that inflation is showing up. The Core YOY (year over year) Consumer Price Index increased to 2.3% well above the Fed's target rate of 2.0%. Even though the Fed is generally referring to the Core PCE for its inflation target, this is still a comprehensive report that is above 2.0%. The Headline CPI MOM (month over month) was double the market expectations and the Core CPI MOM came in higher as well. The Atlanta Federal Reserve District Business Inflation Expectations came in at 2.0% also supporting inflation hitting the Feds' target rate soon.

The biggest report of the week, Retail Sales, was very robust. Retail Sales Ex-Autos jumped 0.8% which was double the market expectations of 0.4%. Plus, December was revised upward significantly. When you look at the headline reading which includes Autos, Retail Sales came in four times higher than expectations, plus December was revised upward.

The Empire Manufacturing Index (NY) came in at more than double the market expectations which was the strongest in 2.5 years.

Industrial Production in January fell short of expectations and Capacity Utilization pulled back from previous readings.

When we saw the report on Weekly Mortgage Applications, they dropped -3.7% as we continue to see a see-saw of weekly difficulties. Purchases dropped -5.0% and Refinances dropped 3.0%.

Federal Reserve Chair Janet Yellen has continued her second day giving her semi-annual testimony in front of the House Financial Services Committee. While we do not expect any material changes from yesterday's testimony, this will need to be closely watched. We will also hear from Eric Rosengren and Patrick Harker this afternoon.

The dollar continues to increase, this morning at a five-week high - a negative for exports. No country wants their currency strong in comparison to other currencies.

Trump will meet with key retail CEOs - not one of them wants the boarder tax implemented, big box retailers get their inventories largely from imports. Trump really has not outwardly addressed is views on the tax recently, assessing the potential impact.

Mortgage rates moving slightly higher so far today on once again solid economic data. Janet Yellen continues her testimony today and if she continues with the theme that a rate hike is in play in March, we don't expect mortgage rates to pull back. Prepare high volatility throughout the day.