Pivotal Week for Mortgage Rates

This is a pivotal week for mortgage rates, and thus far we are seeing movement lower.  A number of key measurements beginning this morning with September personal income and spending. On Wednesday, according to the latest comments from Republicans, they will release the specific details on the tax cuts. The same day, the FOMC policy statement, on Thursday or Friday according to Trump last week, he will announce his choice for the Fed Chair.

This morning, September personal income and spending came in as expected, with spending slightly better but close enough to call it in line. Thus far at 11:00AM, we are seeing positive numbers in the MBS pricing and the 10yr is at 2.37%.

The Russian probe is finally getting some sunlight.  Paul Manafort, a former campaign manager for Trump, surrendered to federal authorities, according to reports, following a special counsel investigation of possible Russian meddling in the election. Indicted on 12 counts, including engaging in a conspiracy against the US government.

Of everything markets must navigate this week, it is the tax cut bill that, according to Republican leaders, will be released on Wednesday. No doubt it will not meet with enthusiasm, and it is the first look at details that so far have been rumors only. Going to be a lot of talk, both positive and negative, when the specifics appear. No Democrat will vote for any tax cut bill.  Republicans in the Senate have a two-vote majority, but Senators McCain, Corker, and Flake are likely to make it a close call when the vote occurs. The plan, according to reports - have the bill ready for a vote by the Thanksgiving recess, then on the President’s desk by the end of the year. Whatever bill evolves, it will increase the US deficit by as much as $5 trillion or as low as $1.5 trillion, the bookends for the estimate. Someday, not too long from now, the US debt will cause economic stress; but as is the case, the deficit is one of the coming events that keeps getting kicked down the road for others to swallow.

The recent chatter from pundits in NY - Trump is leaning toward Jerome Powell to replace Yellen when her term expires next February. Powell is presently on the Board of Governors of the Fed and generally considered a moderate on policy support from the Fed. Inflation isn’t a pressure point now. If he is the one Trump picks he will not be the leader when the FOMC meets in December when markets believe that the Fed will increase the federal funds rate once again, but his opinion and input likely to carry the weight in any decision.

Call your attention to the economic calendar as it contains a full of key economic data. The October employment report on Friday, based on the present estimates is for a nice increase in jobs. Jobs important, but the average hourly earnings top the interest level. The FOMC meeting concludes Wednesday with no change in rates, but the tone of the policy statement always important.