Mortgage Rates Showing Little Movement

Mortgage rates are moving sideways so far today.  Yesterday we saw MBSs improve with the 10yr Treasury note lowering its yield to its 40-day average.  So far this morning, at 11:00AM we see the MBSs down and the 10yr holding steady.

The dollar this morning roaring but remains in a tight range after the huge dollar increases since Trump’s election. Looking for market-moving news or events this morning is that needle in the stack. The dollar is at center stage recently - is it too strong, too weak? Speculation over the dire consequences of a strong dollar in a world of rising US isolationism and protectionism generating a lot of uncertainty. Trump’s promise of fiscal stimulus in infrastructure and, in response, the prospect of US Fed rate hikes through 2017 (2 increases are becoming the norm presently) will support a strengthening dollar. But while this should help exporters to the country do well, the mounting protectionist stance — including plans for border taxes — will block cheaper imports. A rising currency will hurt countries with dollar-denominated debt by raising their costs, precisely when their export revenues fall as they face steeper US trade barriers.

Vulnerable European Union as France could be the next domino to fall in the EU. Currently not likely unless Far-right National Front Leader Marine Le Pen and he is losing in the poll; he has vowed to fight globalization and take France out of the euro zone. The importance here, and I stated it once before in y statements, is that the EU is eventually is going to breakdown. Not a market concern now but the crack in the EU driven wider by Brexit, will widen and lead to its demise. Probably would not have brought it up now but nothing else to worry over today.

This afternoon the Treasury will begin its quarterly refunding with $24B of 3yr notes for sale. Later this afternoon at 2:00PM, December consumer credit from the Fed.  The focus is not the amount, but the usage.

There is going to need to be something pretty shocking happen today for mortgage rates to move out of the tight range. Bias is toward slightly higher rates given the positive move yesterday. Overall, expect average to low mortgage rate volatility today.