Mortgage Rates Give Back Gains from this Morning

Mortgage rates are experiencing increased volatility at the end of this week, which was to-be-expected given the calendar of events and economic data.  Fortunately, the volatility worked in favor of lower rates this morning after Retail Sales and a key consumer inflation report both came in lower than expected. The knee-jerk reaction to the weak June retail sales and CPI this morning sent MBS prices up as much as 34BPS and the 10yr down to 2.28%.

But it all came back and by the end of the day, we saw the MBS pricing just inside negative territory and the 10yr at the spot it started, 2.34%.

True enough, the economy is not improving.  Inflation is only not increasing but the last two months the measurement has declined. Yellen still calls the lack of inflation transitory but with no definition of the word because she and other Fed officials as well as many investors still have no constructive way to assess what almost everyone thought we would see by now. The answer isn’t bowing in the wind, consumers are more conservative than anyone would have believed six months ago.

The dysfunction in Washington, the media stirring the pot, the Trump administration appears to be anything but competent, and even if it is the media and the political opposition will not let anything go unstirred. This morning as bank earnings were reported weaker, Jamie Dimon, JP Morgan Chase swing an anvil at Washington’s gridlock. Likely he was not pleased with the banks 19% shrinking revenues, but someone of his stature finally speaking out. “It’s almost an embarrassment being an American citizen travelling around the world and listening to the stupid sh** we have to deal with in this country,” he told reporters on a conference call, pointing to the need to reform taxes, regulation, and education. “The USA has to start to focus on policy which is good for all Americans and that is regulation, tax, education; we have to get those things done.” Go Jamie; he called Washington politically stupid.

Next week on Tuesday, we get July NAHB housing market index, June import and export prices. Wednesday June housing starts and permits. Thursday July Philadelphia Fad business index, June leading economic indicators. That’s it. Not much to chew on. There is another more serious event - the Senate is scheduled to vote on its health care plan, it is touch and go now.

The 10yr note, driver for mortgage rates, failed this morning at our key pivot 2.28%. I was about to begin floating but began keeping locked before noon when it became clear prices were slipping. The stock market (S&P and DJIA made another new high.

In summary, today's rates were indeed the best of the week on average, but many banks adjusted back toward Wednesday's levels by the end of the day.