Daily Rate Summary
Wednesday, October 18th, 2017

Mortgage Rates and Treasury Yields Mixed.
On Tuesday, Treasury bond yields and Mortgage interest rates were mixed as the preferred investment, stocks hit all-time highs and polished off another big round number -> 23,000.  With bond investors questioning the narrative that inflation reports continue to show subdued wages & prices (more typical of a weak growth economy).  Yesterday’s Industrial Production number shows why tepid growth is all that we can muster.  The December 10 Yr. U.S. Treasury Note stood at a yield of 2.3048% and the 30 Yr. U.S. Treasury Bond is yielding 2.8066%.  30 Year Mortgages according to Freddie Mac were around 3.91% for conforming and 3.72% for Jumbo products.

 

The Federal Reserve’s Industrial production index rose 0.3 percent in September. The rates of change for July and August were notably revised; the current estimate for July, a decrease of 0.1 percent, was 0.5 percentage point lower than previously reported, while the estimate for August, a decrease of 0.7 percent, was 0.2 percentage point higher than before

Industrial Production Rises +0.30% (MoM).
(Chart courtesy of Zerohedge.com).

According to the Fed Release, “The estimates for manufacturing, mining, and utilities were each revised lower in July. The continued effects of Hurricane Harvey and, to a lesser degree, the effects of Hurricane Irma combined to hold down the growth in total production in September by 1/4 percentage point.”

 

Finally - for good measure - 'Industrial' Production remains well below 2014 highs... but the 'Industrial' Average is soaring...”

 

30 Year U.S. Treasury Bond Yield Testing range back below 2.85%.
(Chart courtesy of Zerohedge.com).

 

 

 

The 30 Year U.S. Treasury Bond has now tested the lows and returned to 2.85% 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-June.

10 Year U.S. Treasury Note Yield Rises to 2.3048%.
(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 weeks.  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.

10 Year U.S. Treasury Note Yield Longer-term View back at 2.30% again.
(Chart courtesy of Zerohedge.com).

 

 

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.

December Fed Funds Futures Rate Hike Odds Fall below 80% on CPI Miss.
(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 3.91% up 7 basis points (bps) from the previous week.

 

Treasury Prices and Yields Mixed 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 December settlement closed at a price of 125’11.5 / 32nds; the 10 Year Note was down 2 basis points (bps) on the day, yielding 2.3048%.  The US 30 Year Treasury Bond futures Contract for December settlement closed at a price of 154’00 / 32nds; the 30 Year Bond was up 9 basis points (bps) on the day, yielding 2.8066%.  Mortgage Rates are just off their 2017 lows and are up 7 basis points (bps) from the previous Freddie Mac Survey last week.

 

Thanks to ZeroHedge.com, The Federal Reserve, 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.