Mortgage Rates Still Lower with the Tensions of North Korea

Mortgage rates are moving slightly lower so far today, still following some of the issues overseas with North Korea. Currently, we are seeing at 11:00AM the 10yr at 2.22% and MBS in positive territory.

This morning’s data showed the July Producer Price Index (PPI) showed a yearly gain of only 1.9% for the Headline number and 1.8% for the Core (ex-food and energy). The market was expecting readings of 2.1% for both. This is a miss to the downside, showing no inflation whatsoever in this report. Initial Weekly Jobless Claims hit 244K vs est of 240K. The more closely watched 4-week moving average fell from 242K to 241K. Another strong labor report.

Today we get the most important auction of the week with our 30yr bond at Noon.  Yesterday’s 10yr note auction was so-so, not strong enough to advance the decline in its rate and the yield edged up from the morning levels. The auction went off at 2.25%.

Tensions between North Korea and the US remain a focal point - lots of highly charged rhetoric flying back and forth. Global markets watching but not reacting much.  There has not been any panic buying of safety in the bond market and so far, no big selling in equity markets, although the uncertainty is keeping safe trades in US treasuries and has momentarily stalled the global equity markets.

The price of gold continues to increase; global tensions adding to the moves to safe havens for some investors. No US or global inflation that usually pushes gold higher, it’s a safety move generated by the increasing concerns hanging over the N. Korea/US threat battles. More importantly, gold has met some major technical levels on the recent decline and now appears ready for more increases.

Overall, the data today is good for mortgage rates. Potential volatility remains high simply because of the North Korea tensions.