Daily Rate Summary
Monday, May 21st, 2018

Mortgage Rates and Treasury Yields Fall.
On Friday, Treasury bond yields and Mortgage interest rates fell as the programmed investor selling of bonds ends even as the U.S. 10-Year Note stays above the psychological 3.00% yield level and the Market-Implied probability for a June Rate Hike climbs for the Federal Funds Rate. 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 3.058% and the 30 Yr. U.S. Treasury Bond yielding 3.1999%.  30 Year Mortgages according to Freddie Mac were around 4.61% for conforming and 4.78% for Jumbo products.

Key Economic Releases for the Week of May 21st – May 25th.
Source: BEA, BLS, Census Bureau, Federal Reserve, ISM, U of Michigan, IHS Markit, Bloomberg and Barclays Research.
(Chart courtesy of Zerohedge.com).

According to zerohedge.com, “Finally, here is Goldman with a focus only on the US, and consensus estimates, noting that key economic releases this week are the minutes from the May FOMC meeting on Wednesday and the durable goods report on Friday. There are several speeches from Fed officials this week, including one from Chairman Powell on Friday.”

“We estimate durable goods orders pulled back 1.0% in the preliminary May report, after increasing 2.6% in the prior month on the back of firmer aircraft orders. We expect a firmer 0.5% increase in the durables ex-transportation category and +0.7% for core orders, as we see scope for reacceleration in unfilled orders, and industrials top-line results and commentary remain solid. We forecast a 0.6% rebound in core capital goods shipments, reflecting strong industrial production data.”

U.S. 30 Year Note Yield at 3.20% again.
(Chart courtesy of Zerohedge.com).





U.S. 10 Year Note Yield back below 3.06% 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 June Rate Hike.
(Chart courtesy of Zerohedge.com).

As Deutsche Bank (DB's) Craig Nicol adds, “In terms of the Fed on Wednesday, the consensus is for no change in policy which is a view also shared by the market with futures pricing implying odds of just 5% for a hike. That said market pricing for 4 rate hikes this year (i.e. a further 3) have nudged up above 40% from a low of just 18% at the start of this month so it'll be interesting to see how or if that changes post next week's meeting.”

As can be seen from Freddie Mac’s Mortgage Market Survey, last week, 30 Yr. Fixed Mortgage rates for conforming loans hit 4.61% having increased 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 June settlement closed at a price of 118’27 / 32nds; the 10 Year Note was up 10.5 basis points (bps) on the day, yielding 3.058%.  The US 30 Year Treasury Bond futures Contract for June settlement closed at a price of 141’06 / 32nds; the 30 Year Bond was up 24 basis points (bps) on the day, yielding 3.1999%.  Mortgage Rates are at their 2018 highs and are up another 6 basis points (bps) from the previous Freddie Mac Survey last week.

Thanks to ZeroHedge.com, Mortgage News Daily, 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.

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.