Daily Rate Summary

Mortgage Rates and Treasury Yields Fall.
On Tuesday, Treasury bond yields and Mortgage interest rates fell as bond investors buy some safety after all. Stocks are pausing in their run to all-time highs on the averages.  The allure of fast gains on a frothy stock market outshines boring bonds.  Nervous investors mull economic signals and the impact of the Tax cut on economic growth potential.  Bond investors are looking at the possibility of lower-for-longer policy as an incentive to buy bonds.  Treasury Note stood at a yield of 2.3509% and the 30 Yr. U.S. Treasury Bond is yielding 2.7315%.  30 Year Mortgages according to Freddie Mac were around 3.90% for conforming and 3.72% for Jumbo products.


In the current US economic paradigm, it is now commonplace that any “rise in productivity comes at the expense of [Labor] and the wages of the American worker who saw unit labor costs (wages) decline 0.2% (against expectations of a 0.2% gain).  Down for 2 straight quarters for the first time since 2014;” Zerohedge.com opines.  Real compensation declined 1.1% (YoY), falling for the fourth straight quarter."                                                                  

Real Compensation in Q3 Declines 1.14% (QoQ).
(Chart courtesy of Zerohedge.com).

Nonfarm business sector labor productivity increased 3.0 percent during the third quarter of 2017, the U.S. Bureau of Labor Statistics reported today, as output increased 4.1 percent and hours worked increased 1.1 percent. The productivity increase was the largest since the third quarter of 2014, when output per hour increased 4.4 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the third quarter of 2016 to the third quarter of 2017, productivity increased 1.5 percent, reflecting a 3.0-percent increase in output and a 1.5-percent increase in hours worked.

According to Zerohedge.com, “Higher wage hopes in Q3 got hammered as American worker’s compensation slumps, but Productivity rose 3.0% in Q3 over the previous period.  US labor productivity rose 3.0% quarter-over-quarter in Q3, the biggest rise since Q3 2014. Great news, right?”

Apparently not, when corporations & businesses no longer pass along any productivity gains to the factors [Labor] that produce those savings and instead use them to reward [Capital] with stock buy-backs and increased dividends to shareholders.

30 Year U.S. Treasury Bond Yield Testing range back below 2.80%.
(Chart courtesy of Zerohedge.com).

The 30 Year U.S. Treasury Bond has now tested the lows and returned to 2.80% and back again to the starting point since the market moving comments from ECB President, Mario Draghi regarding the tapering of bond purchases in late-2018.

10 Year U.S. Treasury Note Yield falls to 2.3509%.
(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.

10 Year U.S. Treasury Note Yield Longer-term View back below 2.40% again.
(Chart courtesy of Zerohedge.com).


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 month.  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.

December Fed Funds Futures Rate Hike Odds Rise above 97%.
(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 3.90% lower by 2 basis points (bps) from the previous week.


Treasury Prices Rise and Yields Fall 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 March settlement closed at a price of 124’11 / 32nds; the 10 Year Note was up 3 basis points (bps) on the day, yielding 2.3509%.  The US 30 Year Treasury Bond futures Contract for March settlement closed at a price of 153’23 / 32nds; the 30 Year Bond was up 22 basis points (bps) on the day, yielding 2.7315%.  Mortgage Rates are off their 2017 lows and are lower by 2 basis points (bps) from the previous Freddie Mac Survey last week.


Thanks to ZeroHedge.com, Bureau of Labor Statistics, BofA 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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