Mortgage Rates Moved Lower Today

Mortgage rates moved lower today as bond market improved for the second day in a row, the first time that's happened since early November. The bellwether 10yr once again tried 2.32%, but it failed again as the low today did hit 2.31%, before closing at 2.34%. MBS follows as always. Stock indexes hardly changed today.  

Weekly MBA mortgage applications released early this morning; showed that apps last week increased 4.7% from the prior week, purchase applications +2.0% after declining 3.1% the prior week, re-finance apps +9.0% up from -0.8%.

Pres. Trump officially announced he will move the US embassy in Israel to Jerusalem from Tel Aviv.  Not important to markets in the near term but the move will cause serious implications with the Palestinians and other Arab nations as time moves forward. The move likely will not actually occur until at least 2020, US now looking for a site to build. Already the Brits are opposed to the move. Question - if the US moves will all other countries follow?

Tomorrow we get Weekly Claims, and the October Consumer Credit data, expected to be +$17.0B down from +$20.8B in Sept. The revolving credit component is the most interesting (use of credit cards).

U.S. crude slid nearly 3%, its biggest daily decline in more than two months, after a sharp rise in U.S. inventories of refined fuel suggested demand may be flagging, while U.S. crude production hit another weekly record.

Tax cuts continue to move toward the conference committee that so far has not begun yet. No major problems that will torpedo a tax cut but some of the details still have to be negotiated. The Senate voted today to go to conference to iron out the differences between the House and Senate versions. Markets and Congress remain optimistic a tax bill will be ready for Trump by the end of the year, which usually means by Christmas 19 days from now.

Friday is employment day.  Tomorrow may be another quiet one unless some news about tax cut issues occur. Over the last two months the 10yr has not been able to move and hold below 2.32%/2.30%. Employment data on Friday will break the resistance or the 10yr yield will increase to 2.40% very rapidly. No inflation and other sovereign debt yields declining, and the long end of the curve including MBSs are well supported within the current yield range.

In summary, bond markets posted modest gains today as international tensions simmered over POTUS Trump's decision to move the US embassy in Israel.  With the recent gains of the past few days, majority of clients are favoring locking in these gains ahead of non-farm payrolls on Friday.   With headline risk due to the tax reform bill which can hit at any moment, it makes floating pretty risky right now.  Additionally, the 10yr note does not look like it wants to go much lower than current levels.  Best choice is to go ahead and lock in these gains.