Have you ever worried about the negative repercussions of some anticipated event in your life only to find out they weren't so bad?  For the bond market, last Friday was one of those days.  The much-anticipated phase 1 trade deal was (kind of) announced by both the US and China.  Apparently, there are still a few details left to hammer out not to mention the fact that the thing won't be signed until January at the earliest. Ultimately, it was those "yeah buts" that allowed bonds to almost fully erase the massive day of anticipatory weakness seen last Thursday. That said, last Thursday wasn't the only day that bonds were allowed to harbor some negative anticipation.  Realistically, most of the last 4 months have been spent coming to terms with the eventual end of the trade war.  By now, even my 12-year old son understands the trade war is an excellent manufactured tragedy that gives Trump an easy victory on a key policy goal heading into next year's election.  Markets know where this is all heading (probably), and the only uncertainty is the extent to which Trump's plan may backfire. When the Chinese commerce ministry abstained from offering a dollar amount on agricultural purchases last week and more importantly, when the deal itself simply wasn't signed, shadows of doubt crept in with respect to such a backfire.  But a backfire scenario is not the baseline--just a concern to be managed between now and whenever it becomes clear that we are on the final approach to restoring full-strength trade relations with China (Sept/Oct 2020 most likely).  Such a long time frame means that bonds don't have to rush to get back to higher yields.  The Fed clearly on hold until and unless inflation increases significantly and sustainably.  The global economy could still build enough negative momentum that a trade deal won't save it.  The US economy could even run out of steam simply because investors become too concerned about the incredibly old age of the expansion (the TV likes to say expansions don't die of old age, but if you've ever identified with the notion of "quitting while you're ahead," you disagree).  All these things and more are enabling 10yr yields to remain under 2% even in a world with 3.5% unemployment and ongoing economic growth. All we can really do in such an environment is to watch the range trade that invariably ensues.  Guard the ceilings and capitalize on the floors.  This week begins with an important ceiling (1.86%) already under attack.  If it's successfully defended, the counterattack target would be 1.79%.  Either way, it's important to appreciate that the overall trend is gradually pushing back toward higher yields since September.  That process won't be in question unless yields move below 1.70%.

December 16, 2019 Download our Mobile App: Download our Mobile App: 30 Yr. Fixed 6.28% -0.05%   6.13% 7.26% 15 Yr. Fixed 5.81% -0.04%   5.6% 6.59% 30 Yr. Jumbo 6.30% +0.00%   6.1% 7.45% Compare Mortgage Rates from Local Lenders for Dec 16, 2019 Mortgage Rates Bounce After Trade Deal Update Fri, Dec 13, 2019 4:34PM Mortgage rates were somewhat distressed , to say the least, after yesterday's various news stories pertaining to the US/China trade deal. For a variety of reasons, that's the biggest consideration for financial markets at the moment, and interest rates are no exception. Rates were pushed to the upper edge of their recent range as the signing of the first phase of the trade deal looked increasingly likely by the end of the week. While both sides basically acknowledged the progress on the deal (and even the probability that it will be signed), it was not, in fact, actually signed. Additionally, ... (read more) Mortgage News Daily Rate Change Points 30 Yr. Fixed 6.28% -0.05 0.00 15 Yr. Fixed 5.81% -0.04 0.00 30 Yr. FHA 6.01% -0.04 0.00 30 Yr. Jumbo 6.30% 0.00 0.00 7/6 SOFR ARM 5.89% -0.06 0.00 30 Yr. VA 6.03% -0.04 0.00 Updates Daily - Last Update: 10/31 Freddie Mac Rate Change Points 30 Yr. Fixed 6.17% -0.02 0.00 15 Yr. Fixed 5.41% -0.03 0.00 Updates Weekly - Last Update: 10/30 Mortgage Bankers Assoc. 30 Yr. Fixed 6.30% -0.07 0.58 15 Yr. Fixed 5.67% -0.07 0.61 30 Yr. Jumbo 6.38% -0.01 0.34 Updates Weekly - Last Update: 10/29 UMBS 30YR 5.0 99.51 -0.05   95.05 100.11 UMBS 30YR 5.5 101.02 -0.04   97.47 101.40 10 YR Treasury 4.091 +0.016   3.932 4.780 MBS Live Week Ahead: Despite Friendly Friday Bounce, Risks Remain Mon, Dec 16, 2019 9:14AM Have you ever worried about the negative repercussions of some anticipated event in your life only to find out they weren't so bad?  For the bond market, last Friday was one of those days.  The much-anticipated phase 1 trade deal was (kind of) announced by both the US and China.  Apparently, there are still a few details left to hammer out not... (read more) MBS Price Change UMBS 4.5 97.48 -0.09 UMBS 5.0 99.51 -0.05 UMBS 5.5 101.02 -0.04 GNMA 4.5 97.59 -0.05 GNMA 5.0 99.66 -0.08 GNMA 5.5 100.79 -0.03 Pricing as of: 11/3 8:13AM EST US Treasury Yield Change 2 YR Treasury 3.585 +0.011 5 YR Treasury 3.699 +0.016 7 YR Treasury 3.885 +0.012 10 YR Treasury 4.091 +0.016 30 YR Treasury 4.673 +0.020 Pricing as of: 11/3 8:13AM EST Other News Builder Confidence Highest in Two Decades Mon, Dec 16, 2019 10:41AM Home builders ended the year with an apparent outbreak of euphoria. Responding to higher trending sales and low interest rates they sent the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) soaring to its highest reading since June 1999. NAHB said the December HMI, a measure of builder confidence in the market for new homes... (read more) Lender Survey: Has the Refi Boom Run Out of Steam? Fri, Dec 13, 2019 11:57AM Lenders responding to Fannie Mae's Q4 2019 Mortgage Lender Sentiment Survey ® didn't have as bright an outlook for their future profit margins as in the previous survey when their expectations were at a high for the survey which dates back to 2014. However, 44 percent of the 188 senior lending executives completing the survey believe their profit margins... (read more) Only 2 Million U.S. Homes Remain Underwater Fri, Dec 13, 2019 8:14AM According to Dr. Frank Nothaft, chief economist for CoreLogic, "Ten years ago, during the depths of the Great Recession, more than 11 million homeowners had negative equity." This was a quarter of mortgaged homes, he said. Times have certainly changed. The third quarter report from CoreLogic on the equity in U.S. residential property shows only about 2 milli... (read more) Analytics, CRM Tools; Jumbo and Non-QM Trends: End in Sight for Trade War? Mon, Dec 16, 2019 8:56AM No one wants their labors to go to waste, whether you’re an underwriter who is over-ruled by the head of credit, or an MLO who finds out your approved borrower is going to a competitor. What about designing and building a major amusement park in Louisiana quickly abandoned? Let’s just say nature bats last . Lender Services and Products Nationwide... (read more) Latest Video US-China reach Phase I trade agreement—Three experts on what it means for m... USTR confirms phase one China trade deal, outlines details in statement Former Commerce Secretary Carlos Gutierrez on US-China trade progress Business inventories matches expectations in October, sales revised down Around the Web Reuters Factbox: Beijing statements on trade deal differ from those of U.S. on imports, timing Reuters Kudlow: U.S.-China deal 'absolutely' done, U.S. exports to China will double Calculated Risk Blog Sacramento Housing in November: Sales Down 4.8% YoY, Active Inventory down 33.6% YoY Reuters Wall Street hits record high on China data, trade deal; Apple shines CNBC Mohamed El-Erian sees US and China going into an economic war beyond trade after 2020 election Reuters Mexico says dispute over U.S. labor attaches does not endanger trade deal CNBC Homebuilder confidence jumps to highest level in 20 years Calculated Risk Blog NY Fed: Manufacturing "Business activity was little changed in New York State" Reuters Global stocks gain as investors welcome preliminary U.S.-China trade deal CNBC Treasury yields rise as US-China trade deal drives more risk taking Calculated Risk Blog Mortgage Equity Withdrawal Positive in Q3 Reuters Wall Street steady as U.S., China announce trade deal Reuters Fed policymakers see U.S. economy on good footing

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