Mortgage Rates Open Up Soft This Morning

Mortgage rates are not moving too much today as we have seen a softer open  in the bond and mortgage markets. September import and export prices came in with little surprises as oil was a big factor in the price increases.  Overall,  yr/yr change for consumer imports, which is a critical category for the economy, are up 0.2% on the year. Not much in the way of inflationary pressures when the skewed data is minimized. The bond and mortgage markets did not react much on the strong headlines after looking deeper into the data.

More earnings out in the financials this morning, as both Morgan Stanley and Goldman Sachs beat forecasts. Banks are doing quite well over the last six months. Johnson & Johnson beat estimates, so too did United Health, Comerica, Netflix, Harley Davidson.

September Industrial production came in a little better than expected, but the data generally does not elicit much interest from traders as it is reflected within other more direct data through the rest of the month’s reports.  

The October NAHB housing market index thought to be unchanged at 64 increased to 68, the best since last May.  September index declined 3 points from August from 67 to 64, now improving. We will have more details at later today.

Later today, the Treasury will report Sept budget data and since it is the end of the fiscal year the total deficit for 2017 - and it will be a deficit. With the tax cuts and reforms still a white hot topic, and if passed will likely increase deficit spending we will watch this closely. No concrete plans yet for passage of a tax cut and any potential reforms but yesterday Pres. Trump and Senate majority leader Mitch McConnell made nice when they met. Both have been jawing back and forth over the lack of Senate Republicans’ cohesiveness on health care and about anything else of importance.  

More cage rattling from North Korea.  The deputy U.N. ambassador warned Monday that the situation on the Korean Peninsula "has reached the touch-and-go point and a nuclear war may break out any moment."  First of all keep in mind he is the deputy, in North Korea a minor politician. He commented that NK is the only country in the world that has been subjected to "such an extreme and direct nuclear threat" from the United States since the 1970s — and said the country has the right to possess nuclear weapons in self-defense. The war of words is not likely to stop - and a nuclear war is not likely - but neither the US, the UN and now Russia will end the sanctions that are increasingly harming the rogue regime.

At 11:00AM, the market wants to break 23K, but it is still not there.  The 10yr has been a bit jumpy at 2.31% while MBSs are flat.  I know I have said this many times recently but unless stocks come under heavy selling or there is some other kind of black swan unexpected market shock the rate markets will not have the momentum to decline much or increase much either. The Fed still thought to increase rates once again in December and some say  three additional cuts in 2018, but that is too far in the future for me.

Overall, today's import prices show a bit of inflation, but so far it's not having a significant impact on mortgage rates. The tensions overseas continue to help keep a lid on mortgage rates and we expect the same for today.