Daily Rate Summary

Mortgage Rates and Treasury Yields Rise.
On Wednesday, Treasury bond yields and Mortgage interest rates rose as the bond market is forced to contemplate the effects of a higher Federal Funds rate in the next year.  The U.S. 10-Year Note may be about to break out above the psychologically important 3.00% yield level. 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 2.712% and the 30-Yr. U.S. Treasury Bond yielded 3.005%.  The 30-Year Mortgages according to Freddie Mac were around 4.45% for conforming and 4.88% for Jumbo products.

According to Zerohedge.com, “(As is evident from the Chart below thanks to Knowledge Leaders Capital LLC), [T]he effects of higher long-term interest rates are starting to be squarely felt in the housing space. Pending sales, mortgage applications and new construction have all been weak and look set to get even weaker in the quarters to come as the lagged effects of higher mortgage rates set in. Home prices have yet to respond since inventory levels are still moderate, but inventories aren’t the support they were just two years ago. Meanwhile, affordability levels are no longer very supportive. All this suggests that the housing sector, which has been a bright spot of this recovery over the last five or six years, may not be the same source of wealth accumulation and growth over the next few years, or as long as higher mortgage rates continue to take the juice out of this sector..”

Mortgage Applications and 30-Year Mortgage Rates (Inverted) 2013 to Present.
Source: Knowledge Leaders Capital LLC.
(Chart courtesy of Zerohedge.com).

U.S. 30 Year Note Yield is back under 3.20%.
(Chart courtesy of Zerohedge.com).

U.S. 10 Year Note Yield back below 2.80%.
(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 Probability of a December Rate Hike rises to 78.3%..
(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 4.45% having decreased by 6 basis point (bps) from the previous week and are off the highs for 2018.

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 March settlement closed at a price of 121’23 / 32nds; the 10 Year Note was down 1 tick on the day, yielding 2.712%.  The US 30 Year Treasury Bond futures Contract for March settlement closed at a price of 145’18 / 32nds; the 30 Year Bond was down 15 ticks on the day, yielding 3.005%.  Mortgage Rates are off their 2018 highs and decreased by 6 basis point (bps) from the previous Freddie Mac Survey last week.

Thanks to ZeroHedge.com, Knowledge Leaders Capital LLC, RedFin, ING, National Association of Realtors (NAR), Bureau of Labor Statistics (BLS), Macro-Tourist Kevin Muir, Google.com, FRED, Citi Research, Bureau of Labor Statistics (BLS), Aspen Graphics / Bloomberg, BEA, BLS, U.S. Census Bureau, Federal Reserve, ISM, U of Michigan, IHS Markit, Bloomberg and Barclays Research, B of A Merrill Lynch Global Research, Goldman Sachs, Deutsche Bank (DB), 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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