Mortgage Rates Holding in Tight Range - Lowest Levels in 2017

Mortgage rates held near the lowest levels since November 2016 today. After three days of selling, the stock market taking a short breather today. The bond market was generally unchanged.

The Consumer Price Index (CPI) is one of the most important metrics relied upon by the Fed when it comes to measuring the impact of its policies.  In general, if inflation is increasing or running higher than expected, the Fed will be more inclined to raise rates.  Although the Fed Funds Rate does not directly impact mortgage rates, anything that increases the likely pace of Fed rate hikes would also tend to push mortgage rates higher. With today's report coming in slightly weaker than expected, rates had no reason to move higher.  But true to recent form, they were not able to find much inspiration to move lower either.

The Trump/North Korea rhetoric continues and is the dominant news story this week. Russia waded in with the obvious - that risks of a military conflict over North Korea's nuclear program are very high, and Moscow is deeply worried by the mutual threats being traded by Washington and Pyongyang. Guam posted emergency guidelines on Friday to help residents prepare for any potential nuclear attack. Not news but Trump saying the U.S. military was "locked and loaded" as Pyongyang accused him of driving the Korean peninsula to the brink of nuclear war and world powers expressed alarm.  

Will North Korea start a world war?  We think that is highly unlikely - nor will the US start anything. This is two over the top people that are playing dangerous games but neither will start anything. That said, it is worrisome and at least based on comments from other world leaders it is a huge concern now. According to what I have read today China experts are saying China will not let North Korea turn to dust. So called experts, most having little idea, are coming with multitudes of opinions but none should be taken very seriously at the moment. Watched CNN late last night, could not believe some of the discussions and opinions; every news service calling up anyone with a reputation and opinion willing to get air time; also watched Fox late, same thing.

Next week the North Korea will remain the hot spot. Data next week - nothing on the schedule Monday. Tuesday, the key July retail sales, July import and export prices (measurement on inflation), June business inventories, NAHB housing market index. Wednesday July housing starts and permits, FOMC minutes from the meeting in July. Thursday August Philly Fed business index, July industrial production and factory use, July leading economic indicators. Friday August mid-month U. of Michigan consumer sentiment index. Overall a lot of key economic data but will take a back seat if there is additional escalation of concerns with the hermit region of N. Korea.

In summary, bond markets slumbered past slightly weaker than expected consumer inflation data today.  Once again, we are seemingly stuck in our present range, and it appears it will take dramatic geopolitical or economic news to change that.  I am still recommending to cautiously float but lock it up within 15 days of closing, but a 30-day lock is not bad either.