Daily Rate Summary
Wednesday, July 11th 2018

Mortgage Rates and Treasury Yields Fall Slightly.
On Tuesday, Treasury bond yields and Mortgage interest rates fell slightly as the CB coordinated global growth recovery meme begins to fold leaving institutional bond investors to allocate back to fixed income securities.  The U.S. 10-Year Note is oscillating between 2.75% and the psychological 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 2.857% and the 30-Yr. U.S. Treasury Bond yielded 2.955%.  The 30-Year Mortgages according to Freddie Mac were around 4.52% for conforming and 4.62% for Jumbo products.

According to Zerohedge.com, “Starting with the data, the June CPI report in the US on Thursday is likely to generate the most interest: the Powell-led Fed is clearly growing more conformable with inflation rising back to the Fed’s target, which has played out in the recent data with both the core PCE and core CPI data at and above 2%.  The consensus for the core reading on Thursday is for yet another +0.2% mom reading – the 33rd month in a row that we’ve had such a consensus (of which 18 have proven to be correct). The annual rate is also expected to rise one-tenth to +2.3% (YoY), which would be the highest since January 2017. Headline CPI is expected to come in at +0.2% mom and +2.9% (YoY).”

Key Economic Releases for the Week of July 9th – 13th.
Source: BEA, BLS, Census Bureau, Federal Reserve, ISM, U of M, IHS Markit, Bloomberg and Barclays Research.
(Chart courtesy of Zerohedge.com).

“Finally, here is Goldman's forecast for the week:  The key economic release this week is the CPI on Thursday. There are several scheduled speaking engagements by Fed officials this week, including a speech by New York Fed President Williams on Wednesday. Additionally, the Federal Reserve will publish the July 2018 Monetary Policy Report to Congress on Friday ahead of Chairman Powell’s testimony to Congress the following week.,” said Zerohedge.com.

“The week's first inflation report, the June PPI - ahead of tomorrow's even more anticipated CPI - has come in and it has come in hot and well ahead of expectations on both a monthly and annual basis:  headline PPI rose 0.3%, above the 0.2% expected, if modestly below last month's 0.5% surge, while on an annual basis, PPI increased a whopping 3.4%, well above the 3.1% consensus and May print, and highest level since Nov 2011. Energy goods and Trade services rose most MoM, but Food prices dropped 1.1% MoM,” said Zerohedge.com.

U.S. 30 Year Note Yield is below 3.00% again.
(Chart courtesy of Zerohedge.com).

U.S. 10 Year Note Yield back at about 2.85% 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 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 2 Additional Rate Hikes rises to 35.0%.
(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 4.52% having decreased by 2 basis points (bps) from the previous week and are still near the highs for 2018.

 

Treasury Prices Fall and Yields Soften 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 September settlement closed at a price of 120’005 / 32nds; the 10 Year Note was down 3.5 ticks on the day, yielding 2.857%.  The US 30 Year Treasury Bond futures Contract for September settlement closed at a price of 145’00 / 32nds; the 30 Year Bond was down 4 ticks on the day, yielding 2.955%.  Mortgage Rates are near their 2018 highs and decreased by 2 basis points (bps) from the previous Freddie Mac Survey last week.

 

Thanks to ZeroHedge.com, U.S. Census Bureau, University  of Michigan, Bureau of Economic Analysis, National Association of Realtors (NAR), Macro-Tourist Kevin Muir, Google.com, FRED, National Association of Realtors (NAR), Citi Research, Bureau of Labor Statistics (BLS), Aspen Graphics / Bloomberg, BEA, BLS, 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.

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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.