Mortgage Rates a Tad Higher

Mortgage rates moved a tad higher today, but really only in the amount charged for the rates that were quoted from yesterday.  This morning contained several economic reports and the House passed its tax bill in the afternoon, but none of those events caused much of a stir for bonds.  In fact, all of the bond market movement responsible for today's higher rates occurred during Asian and European trading hours.  When US traders got in for the day, bonds were almost perfectly sideways till close of business.

The House bill stayed within the $1.5 trillion increase in the US deficit to keep the fast track progress.  And while we are at here - a lot of the focus is on the increase in the deficit over 10 years based on the assumptions used for calculations. That should not be seen on its own, as it must also include the continuing increase in US debt that is increasing by about $500B per year recently ($1 trillion every two years. The current debt is about $20 trillion, over the next 10 years at its present pace it will increase $5 trillion more, then add the $1.5 trillion in the tax cuts and the possible US debt total could increase to $26.5 trillion. We need the tax reforms but one day the US will have to face the implications of increasing debt.

There is a cloud forming over the horizon - the increased costs of Social Security, Health care and an aging work force as the majority population as defined by various age groups is declining. Baby Boomers have entered the entitlement system into Social Security and Medicare. Not much we can do about it, and there is no desire to make a case of the debt. Have not done that for a decade and it will not get much attention until the debt becomes a crisis. Any of you that are under 50 or so will not avoid the implications.

Tax bill passed in the House, the stock market roaring ahead but the 10yr note did not move much, as it stands at 2.36% - still in the very narrow range and holding mortgage rates relatively steady. Stock indexes have been choppy recently with sideway trading, DJIA down yesterday, and up today.

In summary, bond markets regressed slightly today, as pundits pondered whether tax reform would pass the Senate.   A Senate train wreck on tax reform could boost bonds, but I am not willing to predict that just yet.  Within 30 days of closing?  Locking is the safe bet, unless you really enjoy "action".