Mortgage Rates Still Moving Higher

Mortgage rates are still moving away from the lows we saw last week since the end of 2016.  Yesterday we saw this same reaction.  What we are seeing is the same direction that we had before all the issues blew up in Washington last week, where we saw a very small negative direction regarding the rate market for about three weeks. Currently at 11:00AM, we are flat on the 10yr at 2.25% and MBSs at a negative 7BPS.

Overall, generally quiet this morning.  The markets are not being impacted by the Manchester, UK terrorist attack last night that so far has killed 22 people. ISIS is claiming responsibility. What is it that ISIS thinks is important killing small groups of innocent people? No political or strategic advantage - just killing to kill including some children.

The Trump Administration will release its budget plan today, cutting spending by $3.6 trillion over the next 10 years. Cuts include Medicaid, food stamps, disability benefits, welfare and student loans. Next step is taking the budget to Congress where it will likely die a slow death as proposed. The cuts will cover the increase in military spending, $200B in infrastructure spending and $19B for parental leave programs and proposes $250B in saving over a decade through the repeal and replacement of the Affordable Care Act through reductions to Medicaid, the federal-state health insurance program for low-income people. Other unspecified reforms to Medicaid and the federal Children’s Health Insurance Program would shave another $616B from government spending through 2027.

The one report this morning came from April new home sales.  They were expected to have declined 2.8% to 605K units (annual), but showed much lower numbers (569K) than forecasts. March sales though were revised upward, which offset a bit the number from this month.  There was no noticeable reaction to what is a softer report but with March revisions it offsets the decline somewhat.

At 1:00 this afternoon Treasury will auction $26B of 2yr notes.

While there's very little in the way of economic numbers due out that can move mortgage rates, there is significant political and geopolitical activity. That being the case, we still expect mortgage rates to continue to trend sideways as it has over the last few days with moderate volatility.