Mortgage Rates Are Trying to Move Lower - But Not Now

Mortgage rates did not move much today, even with the positive movement we had with the 10yr Treasury and MBSs pricing.  Not a lot of movement today in the stock market, while the 10yr did make a new low at 2.03%, but backed off to close at 2.04%.

The US rate markets followed the German bund and other European markets, the dollar dropped again. The ECB meeting is the catalyst today; it left rates and QEs unchanged and Mario Draghi did not have much to say other than the bank will think about possibly beginning to back away from QEs and MAYBE increase the base rates from zero. He, like the Fed, worries that inflation is not acting according to historical relationships when unemployment declined and the economy was improving. 

Yesterday we had two Fed officials beginning to question that the Fed may have been eager to increase rates over the last 18 months. Uncertainty and confusion continue at the central banks. The ECB will meet again next month.

The Senate passed a $15.25B aid package for Harvey and other disasters (that beside Harvey are causing losses) nine states in the west are aflame and becoming more serious each day. Now Irma heading to Florida. The bill is almost double what the House approved yesterday ($8B). Now the bill goes back to the House for a re-vote.  

Q2 unit labor costs were originally reported +0.6% a month ago -today revised to +0.2% with forecasts of 0.3%. More bad news for those looking for inflation.

Tomorrow not much in the way of key data while the stock market holding well in the face of the destruction and what may be coming with Irma. Investors looking past the temporary economic slowing to the massive re-builds that will likely take a year or two. No other place to make money, and these days investors and traders are willing to overlook any issues that would have a potential negative impact. Interest rates very low, the trade that has produced the largest percentage of gains is in gold.

In summary, a slow grind, but interest rates continue to decline. Technical indicators remain bullish. Not much volatility recently in stocks or bonds, both are improving. Kind of a rare event that both fixed income and stocks are moving in the same direction, but the financial world are treading on new historical ground presently.