Mortgage Rates Showing Little Movement

Mortgage rates are moving sideways thus far today after the change we saw in the prices yesterday. 

Inflation? Maybe. Import Prices jumped 0.4% in December which was double the market expectations of 0.2%. Year-over-year (YOY) Import Prices jumped 3.7% which was a huge uptick from November's YOY reading of 1.8%.

Consumer Sentiment saw the preliminary February reading which was good, but lower than anticipated, and much lower than what the number was in January.

It appears that the oil production cuts announced at the last OPEC meeting are sticking as about 90% is holding. This is sending WTI Oil prices and pressures MBSs.

President Trump said that he can now support a "one China" policy which is causing long bond traders to ease up a bit on concerns over a major trade war.  In Canada, their Unemployment Rate dropped to 6.8%.

Yesterday Trump said he would have a tax reform plan in the next three weeks. Global markets rallied lead by the US yesterday. The three key US market indexes made new all-time highs yesterday on the comments of a new tax plan that likely will include a boarder tax that already is getting huge heat from opponents and Trump supporters; no taxes on exports but a 20% tax on imports. Not sure we like that, in the end there will not be that kind of tax, even Republicans are talking against it. Then we have corporate taxes and personal taxes expected to be lowered. Not much outright attention to the increased debts if all his reforms happen - but the fixed income markets are concerned and it is another reason it will be difficult to see lower interest rates.

This week with little domestic economic data traders focused most attention to Trump. Trump continues to swing a wild club on about every issue. I believe now most will continue to hold that all of his changes (tax reforms, fiscal spending, cutting regulations, re-negotiating all global trade pacts) won’t be as easy as what markets presently believe that will keep the Fed nervous about how to manage interest rates. And let’s not forget the health care re-do of the ACA, which will not be easy or quick. US and global markets presently too optimistic. The stock market in Trump’s first 30 days up 26%, the largest improvement for a new president since 1941 per CNBC.

Whatever comes from Trump’s tax plans it will most likely move through Congress easily as Democrats cannot stop it with filibusters. Republicans can pass it easily with 50 votes (assuming all are on board) - it will be passed through budget reconciliation process.

The U. of Michigan consumer sentiment index, the mid-month index did see a sizeable drop in the last 10 days. The final January index was the highest since 2004. The reaction did improve MBS prices.

Mortgage rates are likely to see pressure today due to the increase in oil prices and comments from President Trump, but I am not expecting any major moves short of unexpected news.  At 11:00AM, the 10yr is even at 2.41%, and in a tight range with MBSs pricing.