Mortgage Rates Continued to Improve

Mortgage rates continued improving again today - like a snail in terms of speed but nevertheless rates are holding well even if the equity markets are not selling. This afternoon Treasury auctioned $12B of 30yr bonds re-opening the issue in August. The demand was strong flowing a decent 10yr yesterday.

After the FOMC minutes yesterday, there is some ideas that maybe the Fed is not quite as hawkish about increasing the FF rate in December as markets had perceived. Still a lot of time between now and the December meeting and the potential for the Fed and other central bankers twisting thinking around.

Banks began Q3 earnings reports today.  JP Morgan Chase and Citi both beat Wall Street forecasts but their stocks declined.  Tomorrow its BofA and Wells.

We got a strong September PPI reading today, but the big news will be tomorrow when the CPI data is released.  The bond market never lets an inflation report go unnoticed but there was no negative reaction to the report and investors stepped up to buy 30yr bonds at the auction. Tomorrow September CPI, a more concerning report dealing with consumer level prices.

September retail sales also out tomorrow morning - estimates are for sales to have increased 1.8% after declining 0.2% in August. Sales data will be somewhat skewed due to the hurricanes in Texas and Florida.  Mid October U. of Michigan consumer sentiment index tomorrow.

 The IMF meeting begins tomorrow.  Recent comments from the IMF are not as positive about global and US growth as most in the US are forecasting. The tax cuts, if they actually happen will not speed up growth as much as the Trump administration is forecasting. The IMF over the last three years has not been as optimistic with its forecasts as on Wall Street and Washington have been.

Stocks looking a little weak recently but still the bullishness is alive. Interest rate markets continue to hold well.  The lack of provable inflation, the renewed thoughts that tax reforms may not happen as rapidly as most had expected, and North Korea still a concern although recently Trump and the little man have not been so vocal.

In summary, tomorrow we get consumer inflation data which will most likely move the markets. If inflation comes in hotter than expected, I suspect bonds will react negatively and probably break out of the current trading range to higher yields. Lower inflation will allow bonds to hold current range and possibly break out to lower levels. Not so sure the risk of floating is worth any potential gains.