Daily Rate Summary
Tuesday, February 20th, 2018

Mortgage Rates and Treasury Yields Fall.
On Friday, Treasury bond yields and Mortgage interest rates fell slightly as the bond selling is over for now due to the holiday weekend position squaring.  Bond investors jettisoned Treasury’s and fixed-income in a sell-off route out of Bonds that created some opportunities again in that asset sector.  Bonds lose value as interest rates rise with inflation expectations.  Though Stocks have fallen some, prices are still lofty!  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 2.8749% and the 30 Yr. U.S. Treasury Bond yielding 3.1316%.  30 Year Mortgages according to Freddie Mac were around 4.38% for conforming and 4.88% for Jumbo products.

The growing twin budget deficits and the fate of the U.S. Dollar has Bond Investors rapt attention it would seem after this holiday intermission.  Correlating closely with the short-term movement of the U.S. Dollar the 10 Yr. U.S. Treasury note yield has fallen below 2.90% again as nervous investors weigh their options.  

Co-Incidence or Correlation U.S. Dollar index vs 10 Year Treasury Yield Real-Time.
(Chart courtesy of Zerohedge.com).




Meanwhile, according to Zerohedge.com, “Goldman expects the 10Yr. to hit 3.25% by the end of 2018, amid the debt issuance deluge needed to fund the soaring US deficit, and warning that "the continued growth of public debt raises eventual sustainability questions if left unchecked."

Finally, even bond bulls like BMO's Aaron Kohli are bracing for the 3% test in the coming trading sessions: “We’ve got supply and some supports have given way,” he said, referring to the 10-year note breaching the 2.94 percent level last Thursday. “We could see another revisit this week."

Which is ironic, because the level of short covering across the curve in the last two weeks was close to all-time highs over fears the Fed may actually ease policy after the February volatility eruption.”

30 Yr. U.S. Treasury Bond back around 3.11% 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 4.38% higher by 6 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 120’18.5 / 32nds; the 10 Year Note was up 4 basis points (bps) on the day, yielding 2.8749%.  The US 30 Year Treasury Bond futures Contract for March settlement closed at a price of 144’07 / 32nds; the 30 Year Bond was up 7 basis points (bps) on the day, yielding 3.1316%.  Mortgage Rates are near their 2018 highs and are higher by 6 basis points (bps) from the previous Freddie Mac Survey last week.

Thanks to ZeroHedge.com, BMO, Goldman, JPM, 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.