Daily Rate Summary
Wednesday, February 14th, 2018

Mortgage Rates and Treasury Yields Fall.
On Tuesday, Treasury bond yields and Mortgage interest rates fell as Bond investors saw bargains in Treasury’s and fixed-income as a safe haven.  Bonds lose value as interest rates rise.  Though Stocks have fallen some, prices are still lofty!  The runs to all-time highs on the averages are over for now.  Nervous investors mull economic signals and the impact of the Tax cut on economic growth potential.  The 10 Yr. Treasury Note stood at a yield of 2.8294% and the 30 Yr. U.S. Treasury Bond yielding 3.1111%.  30 Year Mortgages according to Freddie Mac were around 4.32% for conforming and 4.63% for Jumbo products.

 

Household debt and credit outstanding have hit another all-time high in Q4 2017.  According to Zerohedge.com; "It should not come as a surprise that according to the just released latest quarterly household debt and credit report by the NY Fed, Americans' debt rose to a new record high in the fourth quarter on the back of an increase in virtually every form of debt: from mortgage, to auto, student and credit card debt (although HELOCs posted a tiny decline)."  

N.Y. Federal Reserve: Household Debt and Credit as of Q4 2017.
(Chart courtesy of Zerohedge.com).



Commenting further, Zerohedge.com said, “Aggregate household debt increased for the 14th straight quarter, rising by $193 billion (1.5%) to a new all-time high, and as of December 31, 2017, total household indebtedness was $13.15 trillion, an increase of $572 billion from a year ago - the fifth consecutive year of increases - equivalent to 67% of US GDP, versus a high of around 87% in early 2009. After years of deleveraging in the wake of the 2007-09 recession, household debt has risen more than 18% since the trough hit in the spring of 2013.”

30 Yr. U.S. Treasury Bond back around 3.15% again.
(Chart courtesy of Zerohedge.com).






U. S. 10 Year Note Yield above 2.8500%.
(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 2.66 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 4.32% higher by 10 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 121’00 / 32nds; the 10 Year Note was up 3.5 basis points (bps) on the day, yielding 2.8294%.  The US 30 Year Treasury Bond futures Contract for March settlement closed at a price of 144’18 / 32nds; the 30 Year Bond was up 5 basis points (bps) on the day, yielding 3.1111%.  Mortgage Rates are near their 2018 highs and are higher by 10 basis points (bps) from the previous Freddie Mac Survey last week.

 

Thanks to ZeroHedge.com, New York Federal Reserve Board, JPM, B of A Merrill Lynch Global Research, Goldman Sachs, Bloomberg, and FreddieMac.com for Charts and Graphics.

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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.