Mortgage Rates A Little Better After Rough Start

Mortgage rates are trading a little better today after a rough start early.  June personal income and spending was released this morning. Income expected +0.4%, as reported 0.0%.  June spending expected +0.1% was right on +0.1%.  Even with the revisions to the previous months, there is no increase in inflation in these numbers. The report should not have any impact on the bond market or mortgage rates.

The July national ISM Manufacturing PMI hit 56.3 which is at a very high level considering that any reading above 50.0 is expansionary. It is basically what the market expected (56.5). But what was not expected is the ISM Prices Paid component jumped to 62.0 vs est of 55.5.

The June Construction Spending reading missed the mark, falling by -1.3% vs est of a small gain of 0.4%. But May was revised higher.

Former Fed Chair Alan Greenspan expressed concern over a bond "bubble". He said “By any measure, real long-term interest rates are much too low and therefore unsustainable.” and “When they move higher they are likely to move reasonably fast. We are experiencing a bubble, not in stock prices but in bond prices. This is not discounted in the marketplace.” He also warned, “The real problem is that when the bond-market bubble collapses, long-term interest rates will rise.” “We are moving into a different phase of the economy -- to a stagflation not seen since the 1970s. That is not good for asset prices.”

Tomorrow ADP will release its July jobs data, expected at 175K private jobs.

After a softer open this morning in the bond market, reality tossed Greenspan’s comments into the circular file. The 10yr started at 2.31%, and at 11:00AM is now at 2.28%, with MBSs in positive territory.  It has been almost three weeks now that the 10yr has held between 2.32% and 2.28%; the 20, 40, and 100-day averages all now at 2.28%. Not likely the 10yr will break into new near-term lows unless stocks roll over today, and that is also unlikely.