Mortgage Rates Continue the Trend Upward

Mortgage rates are moving slightly higher so far today, which has been the trend this week since Monday afternoon.

This morning’s data started out with Personal Income and Outlays. The nation's savings rate moved up to an eight-month high in May. Personal Income increased by 0.4% (vs est of 0.3%) while Personal Spending grew by only 0.1%. PCE (Personal Consumption Expenditures) were in line with estimates. The Core PCE YOY hit 1.4% vs est of 1.4% and the headline PCE YOY hit 1.4% vs est of 1.5%. Both far away from the Fed's 2.00% target rate but were what the market expected.

June Chicago PMI was stronger than anticipated at 65.7, meaning any reading above 50.0 is expansionary and any reading above 55.0 is very strong - a reading above 60? Red HOT!!! This is first reading above 60 since 2014. Consumer Sentiment Index from the University of Michigan's final June reading moved from 94.5 to 95.1.

This week, volatility was the 10yr benchmark. Interest rates around the world have increased on increasing thoughts that the central bankers are joining in on the Fed’s intent to return to normal after years of support to global economies after the 2008 financial meltdown. The question now is, what is normal? Central banks have managed the economies with money printing that has burned up most of the printing presses for 8 years now, difficult for many to remember what the central bank’s roles were before 2008. This week, comments from Draghi and Bank of England’s Carney roiled markets and confused traders and investors, but there was nothing new.

The dollar this morning, after taking huge drubbing the past three days, is finding some minor support in early activity. Crude oil continues to climb, taking some of the recent declines back, at 9:00 +$0.32 to $45.25.

The global and domestic manufacturing data is very negative for MBS (higher mortgage rates) and if it were not for the long holiday weekend (Monday the bond market is a short session and Tuesday it is closed...most traders taking off today at lunch), MBS would be down much more. So far for the week, MBS are down -45BPS. 

Volatility has certainly kicked up this week after the central banks’ twisted the markets. More than likely, it will likely take a week or so for a new consensus to form. US stocks now seeing volatility for the first time in months keeping traders edgy and less likely to make any unnecessary trades. However, beginning of next week should be relatively calm