Daily Rate Summary
Wednesday, January 17th, 2018

Mortgage Rates and Treasury Yields Fall.
On Tuesday, Treasury bond yields and Mortgage interest rates fell slightly as Bond investors are re-entering curve flattening trades that they put on earlier.  Stocks are still hot! and making a 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.  10 Yr. Treasury Note stood at a yield of 2.5371% and the 30 Yr. U.S. Treasury Bond is yielding 2.8254%.  30 Year Mortgages according to Freddie Mac were around 3.99% for conforming and 4.12% for Jumbo products.

 

According to Zerohedge.com, “Industrial Production surged 0.9% MoM in December (almost double the 0.5% rise expected) and pushed the overall level above its Nov 2014 peak to a new record high.”

Industrial Production Surges to Record High of 107.5 (MoM) in December.
(Chart courtesy of Zerohedge.com).




Adding, “The December beat was helped by a notable downward revision for Nov (from +0.2% to -0.1% MoM).  And the biggest driver was a huge surge in Utilities... (so blame the weather!).  Since the previous peak in US Industrial Production on November 2014, The Dow is up 46% and Industrial production is unchanged...”

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

The yield curve continued to flatten to new cycle lows...

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 Yr. U.S. Treasury Note Yield Short-term View back around 2.5371% again.
(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 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.

March Fed Funds Futures Rate Hike Odds Rise above 72%.
(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 3.99% higher by 4 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 122’31.5 / 32nds; the 10 Year Note was up 1.5 basis points (bps) on the day, yielding 2.5371%.  The US 30 Year Treasury Bond futures Contract for March settlement closed at a price of 150’26 / 32nds; the 30 Year Bond was up 10 basis points (bps) on the day, yielding 2.8254%.  Mortgage Rates are off their 2017 lows and are higher by 4 basis points (bps) from the previous Freddie Mac Survey last week.

 

Thanks to ZeroHedge.com, Federal Reserve, 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.