Mortgage Rates Pushing Lower

Mortgage rates have returned to their recent trend of setting new 2017 lows today after hitting a bump in the road yesterday.  At this point, we are getting closer to some rates we saw shortly after the election.

The stock market declined today after improving yesterday.  Based on the DJIA the equity markets have seen little improvement recently and some are even projecting that the DJIA may fall 400 points before it finds a solid bottom and prior to any significant improvements. The beneficiary is the bond and mortgage markets as investors increasingly moving money out of equities and into safe bonds helping mortgage rates. The geo-political issues also bearing down on stocks and helping interest rates decline.

Today the 10yr broke its next resistance, declining below 2.20%, a move I did not think would happen this quickly.  If it were not for the stock market that was likely the case. Technically the DJIA is trading below its 20 and 40 day averages.  At 20,518 a break below 20,468 will set the move to 20,150 and push interest rates lower. I have a feeling this will happen soon, but unfortunately, it may only last a short time.

Hard economic data recently has not lived up to the hype and those not-so-important consumer measurements we see and media and analysts proudly parade as evidence of improving economy.

Retail sales in March, housing starts and permits today, the NAHB housing market index, various regional Fed indexes - all weaker. The current outlook for Q1 GDP, although a rear view mirror, is going to be much lower than what economists and markets were expecting. The forecast for first-quarter real residential investment growth inched up from 12.0 percent to 12.4 percent after this morning's new residential construction report from the U.S. Census Bureau. The forecast of the contribution of inventory investment to first-quarter growth declined from -0.71 percentage points to -0.76 percentage points after this morning's industrial production release from the Federal Reserve Board of Governors. US Stock indexes increasing vulnerable for more selling, US interest rates will benefit.

In summary, bond markets continued rallying in impressive fashion today, and yields hit levels last seen in December.  Whether it is international tensions, fiscal disarray, or economic stagnation, bonds are benefiting. Hard not to consider floating here, as pricing typically takes longer to improve during rallies than it does to worsen during sell-offs.