Mortgage Rates Steady After Good Economic Reports

Mortgage rates are moving sideways so far today.  Yesterday the stock indexes traded weaker, while the 10yr and MBS prices improved. This morning, stock indexes in futures trading were firm and the 10yr (2.35%) and MBS prices (a negative 8BPS) are a bit lower at 11:00AM. Not really anything different than markets have been trading for a month now. With all the focus on the tax bills and somewhat less interest on current economic data, markets are moving on every sentence uttered by members of Congress as they relate to the tax cuts that are going to occur, although when and what the final bill will look like keeps investors edgy.

Initial Weekly Jobless Claims came in at 249K vs est of 235K. The more closely watched 4-week moving average rose from 231,250 to 237,750.  The Philly Fed Manufacturing Index had its 16th straight month of expansion with a reading of 22.7. Almost all the future indicators rose, and firms continue to expect growth in both activity and employment over the next six months.

October Industrial Production was very strong with a 0.9% gain vs est of 0.5%. The Manufacturing component had a 1.3% surge. Capacity Utilization was also higher than expectations.

Republicans talking about a vote today. The House is expected to take up the bill this afternoon after an 12:30 meeting with Donald Trump. Last night, The King of Tweets saying “Big vote tomorrow in the House. Tax cuts are getting close!”. Still some resistance to the reported plan by some Republicans. The House cannot lose defectors if the current bill is to pass. The new issue: including the repeal of the tax penalty in Obamacare that is charged to those that do not sign up for insurance. Overall, a tax package will eventually become law, but in the meantime, markets will suffer the constant comments coming out of the deliberations.

The economic numbers, overall, were slightly better than expected. Markets still more focused on the tax cuts but not entirely; the economy looks like it is moving forward with no inflation.  The lack of it is a support for the long end of the curve that continues to attract safety movement with equity markets remaining very overbought technically. I do not expect significant mortgage rate volatility today. However, anything unexpected with the tax plan could move markets and mortgage rates.