|10 year government bond yield||3.02%|
|30 year fixed rate mortgage||3.85%|
Stocks are lower this morning on no real news. Bonds and MBS are up.
Jerome Powell spoke yesterday and said that rates are “just below” the neutral range. These comments pushed up bond prices (rates fell) and contributed to a rally in the stock market. He may have been walking back an earlier unscripted statement which said that the Fed had a “ways to go” before hitting neutral. He also said that there were no financial bubbles in the US and that the stock market was near its long term valuation average. This put a bid under stocks and other risk assets.
The Fed Funds futures didn’t really react all that much, however a consensus seems to be building that we are looking at a hike in December, and probably one more in 2019.
TBAs have spent the last couple of days catching up with the move lower in the bond market. MBS were up a good 6 ticks or so in a flat Treasury market. Note we will get the minutes from the November FOMC meeting at 2:00 pm EST. It probably should be a nonevent, but just be aware.
GDP came in at 3.5% for the third quarter. This was the second revision out of BEA and there were few changes. This is a deceleration from Q2’s torrid 4.2% growth rate. The PCE price index rose 1.5%, which is slower than the second quarter’s 2.0% pace, and below the Fed’s target or 2%.
Mortgage applications increased 5.5% last week as purchases rose 9% and refis rose 1%. Last week contained the Thanksgiving day holiday, so there were all sorts of adjustments to these numbers. Still it is encouraging.
New Home sales came in much weaker than expected, and we saw major, major declines in the Midwest and Northeast (which dropped around 20%). New Home Sales is a notoriously volatile number, and is often subject to major revisions. That said, there is no way to put a positive spin on that number – it was simply lousy.