Mortgage Rates a Little Better This Morning

Mortgage rates are a little better today after the small movement we saw go up yesterday. As I mentioned last night, the stock indexes had a good day while the bond and mortgage markets backed down in price yesterday. This morning, the roller coaster is going up again – if we could only predict how the daily stock market will trade, then we would have a solid handle on the movements in bonds and mortgage prices. Even with all this, the Weekly mortgage applications this morning were soft but not much.

President Trump was in Phoenix yesterday. On the NAFTA trade treaty, he remarked he was thinking about terminating it because talks had broken down and he doesn’t believe there is any common ground. "Personally, I don't think we can make a deal. I think we’ll probably end up terminating NAFTA at some point." Trump also said in Phoenix that he will build the Wall as he said in his campaign. That may be one reason there is no follow-through in US stock indexes early this morning. Trump threatened to shut down the government if Congress does not pay for his proposed border wall, and accusing his critics of trying to erase history. Mostly, though, stock indexes are looking more like consolidation trade, with most forecasters expecting stocks will continue to improve. Europe is improving and Draghi is expected to signal the ECB is about to wind down its EQs and negative interest rates.

July new home sales were anticipating no change from June, but new home sales declined 9.4% to 571K units. The median sales prices are up 6.3% to $313,700, adding further hurdles for prospective home buyers as supply dwindles. In July, a 5.8 months’ supply, up from 5.4 months in June as sales slipped. New home sales data are contracts signed but not yet closed. There was no reaction to the weakness in the bond and mortgage markets. Upward revisions were totaling 33,000 in the two prior months, which now stand at 630,000 and 618,000. This series, where sample sizes are low, is often volatile month-to-month with the 3-month average, still over 600,000 and just off expansion highs, telling the more reliable story.

Tomorrow, the Jackson Hole economic symposium gets under way. Friday speeches from Yellen and Draghi. As noted, markets expect Draghi’s speech will be the center point regarding future policy from the ECB. Lots of economic academics out there; could be some remarks from any one of them that causes market volatility. Economists, we must remember, are swinging in the wilderness now, with most historic comparisons not meeting their forecasts.

The bellwether 10yr note is chopping back and forth with no direction presently. Models are still holding minor bullish readings, but I am changing the lock recommendation to 30 days as I do not anticipate any drastic movement downward now.