Daily Rate Summary

Mortgage Rates and Treasury Yields Rise.
On Thursday, Treasury bond yields and Mortgage interest rates rose as risk-on in the equity market causes rotation out of bonds.  Though Stocks have fallen some, prices are still lofty just a couple of percent off all-time-highs in indexes.  Nervous investors mull economic signals and the impact of the Tax cut on future growth potential & the aging economic recovery. The 10 Yr. Treasury Note stood at a yield of 2.8358% and the 30 Yr. U.S. Treasury Bond yielding 3.0431%.  30 Year Mortgages according to Freddie Mac were around 4.42% for conforming and 4.48% for Jumbo products.

Source: freddiemac.com 

“According to the latest Mortgage Banker Association data, mortgage demand continued to slide and last week mortgage application volumes slumped another 1.9% W/W (and -5.5% Y/Y), despite a modest dip in rates. And while initial purchase applications dropped 2.0%, it was the -1.7% drop in refinance transactions (which followed a 4.9% drop the previous week) that was once again the biggest concern, as it plumbed levels not seen since the fall of Lehman, nearly a decade ago”, Zerohedge.com reported.

Mortgage Bankers Association Refinance Index falls to Multi-Year Lows.
Source: Mortgage Bankers Association.
(Chart courtesy of Zerohedge.com).

Finally, As the WSJ explains it, "increased mortgage rates can hamper refinancing activity because many homeowners have rates that are already lower than what lenders can now offer. In other cases, the higher rates cut into the savings a homeowner stands to reap by refinancing a mortgage."

U.S. 30 Year Note Yield above 3.08% then back below 3.00%.
(Chart courtesy of Zerohedge.com).

U. S. 10 Year Note Yield back below 2.80% and Holding.
(Chart courtesy of Zerohedge.com).

The 10 Year U.S. Treasury Note has tested the lows and is moving back to the upper trading range in bond yields.  We await whether that gap at 2.05% will get filled in coming months.  If so, we will get another run at historically low rates before the final blow-off in Credit Markets sends Mortgage Interest rates up for good.

The above Chart does suggest that a constructive set-up is forming in the 10 Year Treasury Note with the potential to push the yield to around 2.00% over the next year.  It is crucial that Mortgage Rates stay at or below 4.00% or demand for mortgage loans will dry up.  The window of opportunity for borrowers seeking mortgage refinancing & home purchases is still open for now.

Market-Implied # of Rate-Hikes In 2018 above 3.10 rate moves.
(Chart courtesy of Zerohedge.com).

As can be seen from Freddie Mac’s Mortgage Market Survey, last week, 30 Yr. Fixed Mortgage rates for conforming loans hit 4.42% higher by 2 basis points (bps) from the previous week.


Treasury Prices Fall and Yields Rise for U.S. 10 Yr. and 30 Yr. Treasuries.
At the Chicago Board of Trade (CBOT): the US 10 Year Treasury Note futures Contract for June settlement closed at a price of 120’15 / 32nds; the 10 Year Note was down 12 basis points (bps) on the day, yielding 2.8358%.  The US 30 Year Treasury Bond futures Contract for June settlement closed at a price of 145’12 / 32nds; the 30 Year Bond was down 24 basis points (bps) on the day, yielding 3.0431%.  Mortgage Rates are near their 2018 highs and are higher by 2 basis points (bps) from the previous Freddie Mac Survey last week.


Thanks to ZeroHedge.com, Mortgage Bankers Association, Black Knight, Wall Street Journal (WSJ), B of A Merrill Lynch Global Research, Goldman Sachs, Bloomberg, and FreddieMac.com for Charts and Graphics.

Disclaimer: The Information & content in this message is solely the opinion of the author and believed to be from reliable sources. Charts and tables contained herein were taken from other sources and a best effort was attempted by the author to give attribution where possible. None of this material should be construed as fact, and is not intended for use by reader as investment advice or relied upon for making financial decisions.

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