Mortgage Rates Not Moving Despite Good Data - North Korea Again in the Picture

Rate markets opened unchanged early this morning and have been basically even towards mid-day.  At 11:00AM, the 10yr is at 2.20% and MBSs are flat. 

Weekly jobless claims were expected to come in higher than last week, especially in Light of the two hurricanes in Texas and Florida and throughout the Southeast.  There was no reaction as claims are going to be volatile with Irma and Harvey still having an impact on jobs. Most of the possible increases in claims are going to be temporary while the hit regions rebuild and return to normal, but that will not happen overnight.

August CPI was also expecting an increase, and came in a tad better. Inflation based on yesterday’s PPI and this morning’s CPI is still not showing the growth in inflation that central banks want to see. An increase in the cost of gasoline and rental rates, signs of firming inflation that could allow further monetary policy tightening from the Federal Reserve this year. As I noted yesterday, the Fed’s favorite inflation data is the personal consumption expenditures released with the monthly income, and spending reports each month (this month on the 29th).

The Bank of England saying today that it could raise interest rates for the first time in a decade in the coming months. The Bank left rates unchanged at 0.25% but warned that if the economy continued to improve a rate hike may be in the cards--if inflation increases. So far global inflation remains a conundrum for all central banks. Not increasing while economies improve and more people back to work.

North Korea is at it again with huge threats. Kim Jong-un now is threatening Japan with annihilation. His Asia-Pacific Peace Committee is saying, “Japan is no longer needed to exist near us.” The US was the “chief culprit” for the sanctions, which amounted to “state terrorism”, the Peace Committee said, adding: “Now is the time to annihilate the US imperialist aggressors.” The Peace Committee went on saying NK would reduce the United States to “ashes and darkness” for supporting a U.N. Security Council resolution and sanctions over its latest nuclear test. Peace Committee? Based on market reactions he did not get the response he was looking for. No safety trades in bonds or gold.

We are now seeing models turn bearish for interest rates when the 10yr tested 2.23% early this morning, the last vestige of technical bullishness went up in smoke. That said, it is still all about the stock market and potential fears resurrecting over North Korea. Next week, the FOMC meeting and Janet Yellen’s press conference. Approaching an FOMC meeting always brings out thoughts of another rate increase. Fed officials have their gags on this week and before the meeting next Tuesday and Wednesday.

The economic data denoted above was positive and could push mortgage rates higher. However, North Korea threatening Japan with annulation is helping to keep a lid on mortgage rates. The biggest factor today for mortgage rate volatility is North Korea.