Mortgage Rates Quiet Today

Mortgage rates are moving sideways so far today. Yesterday the 10yr dropped to 2.33% at its rock hard technical resistance (2.32%), MBS prices were better, the stock indexes tried a nice rally, the DJIA +198 points before reversing yesterday afternoon to close down 41 points. This morning nothing is really happening.

The key things today is Trump’s meeting with China’s leader Xi Jinping, but many are not anticipating anything of immediate consequence from the weekend meeting. Beside the trade talks that are the headlines and will get most attention, the North Korean threat is increasing and Trump must convince Xi to intervene and cool down N. Korean’s drive to develop nukes. It is a more serious concern than most understand, as we have 23K troops in S. Korea defending the 28th parallel since 1955.

Recently we are hearing more concern that those huge tax cuts that markets have bet on my now be in trouble and may not happen this year. Speaker Ryan implied it will take more time; the House has a plan, the Senate still working on it, and the Administration, other than Trump’s campaign promises, has not gotten to details. Anyone believing tax cuts will happen this year is going to very disappointed. The recent defeat of health care reform and now the Supreme Court nomination should make it abundantly clear that there is a divide in Congress that is much deeper than was thought. Very unlikely that Democrats and Republicans can work together on anything this year.

Then we have the Fed yesterday in the FOMC minutes talking about beginning to reduce its portfolio of bonds and MBS securities that it bought since 2009. Prior to the financial crisis of 2008 the Fed’ balance sheet was $800M, now stands at about $4.2B. Most of the increase has been in MBSs. It is not clear as most Fed communications are but it is more evidence that the Fed is backing away from support.

Weekly jobless claims came in better than anticipated and offset the two previous weeks’ reports, with the 4-week average at 250K.  Claims as we have noted recently are not much of interest to traders now, as there is no debate that jobs are increasing presently.

S.F. Fed President John Williams (non-voting member) will speak this morning.

There should not be much volatility today in the market as the only economic news today had no impact on mortgage rates. The only thing that can move mortgage rates today is information coming from the U.S./China Summit.