Mortgage Rates Not Moving - Waiting Now on Tax Bill

This is no surprise as the US stock indexes are better yet again this morning, while the 10yr note yield and MBS pricing is moving very little from its open as it sits at 2.37% at 11:00AM.

The Tax Cut Bill is expected to be worked out today and released next week. Yesterday, Senators Rubio and Lee voiced concern about voting for the bill unless the child tax credit is doubled to $2,000 from $1,000 that is presently in the bill being discussed. Markets burped a little yesterday when the two senators announced they may not vote for the bill. Likely more a political move rather than anything serious, as both senators are going to vote for it when the roll call comes. Republicans do not have much latitude for defectors, John McCain, undergoing treatment for a brain tumor, may not be able to vote. No Democrat will vote for the cuts and Republicans can only lose two votes to pass it.

The December NY Fed Empire State manufacturing index came in as expected.  New orders remain robust, but unfilled orders are in the negative column for the second month in the row.  The monthly report gets some attention, although it is a very narrow geographic view. Next week the more encompassing Philly Fed business index will be reported.

The November industrial production and capacity utilization missed its mark, but with October’s revision, the two months together, and production and manufacturing are continuing to improve.

News reports on the tax cut bill is now focusing on how to keep the $1.4 trillion cost from exceeding the target. Sweeteners that have emerged this week - including cutting the top individual tax rate for the highest earners to 37%, from 39.6% currently, and broadening the kinds of state and local taxes that would qualify for an individual deduction that’s capped at $10,000 - are expected to lose an estimated $200B or more over 10 years. Bloomberg reporting that “In their compromise legislation, lawmakers have considered setting the corporate rate - which is currently 35 percent - at 21 percent instead of 20. That change would allow them to begin the rate cut in 2018 instead of a year later. They are also said to have discussed setting higher-than-planned tax rates—as high as 15 percent - on U.S. companies stockpiled offshore profit….” In addition to Rubio and Corker, the votes of a handful of other GOP senators remain in question. Mike Lee of Utah is “undecided,” and, like Rubio, he is working to make the child tax credit more generous, according to Conn Carroll, his spokesman. Jeff Flake of Arizona, who has voiced concerns about tax cuts adding to the deficit, said Thursday he is undecided as well. Now we are hearing that Susan Collins from Maine has some concerns.

Mortgage rates could see some volatility today if the tax bill comes out of committee and it looks like it will pass. Hard to get a real read on which way this will go.