Mortgage Rates Holding Steady

Mortgage rates saw minor improvements today after this morning pricing levels.  There was nothing significant other than interest rates continued to trade in their respective ranges. Every market in every part of the world is watching the US and President Trump, who has managed to shake up economists, traders, investors, and key central banks. Stocks are moving higher, interest rates are volatile on the global level, but reasonably with no panic selling. The fact that interest rates have held steady suggests there is still much concern that the present beliefs are too optimistic.  

Consumer sentiment is easing back but remains very strong when we got the preliminary February reading this morning. Japanese Prime Minister Abe said today that his country’s deputy prime minister, Taro Also, and U.S. Vice President Mike Pence have begun to “create a new framework for a dialogue,” suggesting that Tokyo has agreed to follow U.S. President Donald Trump’s call for more bilateral deals.

The Trump regime will alter the Fed’s make up.  The central bank said today that Daniel Tarullo, the Federal Reserve’s regulatory point man since 2009, will resign this spring.  He was appointed by President Barack Obama in January 2009 and overhauled the way the Fed oversees the largest U.S. banks. Trump has said he will appoint the long vacant Vice Fed Chair soon, usually the Vice Chair oversees Fed bank oversight.  

It has been years, if not decades, that the world is uncertain and confused with the new Trump presidency. Never in my working life, even the Regan presidency, have global markets had to face such a huge coming shakeup.

Not just the US, the EU is in increasing turmoil with major elections coming in France and Germany, the Greek debt, the Brexit, and increasing nationalism spreading through the EU. Difficult to assess the sea changes with any reliability now, although investors are optimistic that Trump can achieve all the issues now being bounced around - major trade policies change, tax cuts, health care, de-regulations, and the boarder tax that is getting more resistance each day.  Now the Fed is in the picture with the resignation of Daniel Tarullo at the Fed. The best I can offer is to slowdown and relax - take the rapidly changing events with that grain of salt and keep an open mind now.  

The yield on the 10yr is now 2.41%. While rates are expected to increase, rates have held steady recently even with optimism increasing and stocks rallying. Most now expect the Fed will increase rates and yet long term rates have performed reasonably well. We still have bearish reads on all the models and momentum indicators but fundamentally there is support as investors and central banks are buying insurance in US treasuries.

In summary, with no major data until Wednesday of next week and with the 10yr holding under 2.42, this maybe a good time to float.  As soon as we break 2.42, then one must get back to see what the rewards maybe versus the risk if it goes higher.  Next week brings consumer and producer inflation data that may guide bonds, but for now we are just treading water.