Stocks are pointed higher and Mortgage Bonds are lower so far this morning. The Mortgage Bankers Association reported that Mortgage Applications increased by a whopping 11.6% for the week ending 10/17. With the decline in rates last week, it should be no surprise that this move higher was led by Refinances, which surged 23% to the best level in almost a year. Refinance activity increased from 59 to 65% of total applications. Interest rates dropped 10bp from 4.20 to 4.10%, to the lowest level since May 2013. Purchases unfortunately did drop 5% and are down 9% from this time last year. But the numbers on Purchases do not adjust for the Columbus Day Holiday, which was the likely reason it dropped. ARMs increased to 9.4% of total applications, the highest level since June 2008.
The Mortgage Bankers Association also released some expectations for next year at their conference in Vegas this morning. They expect Purchases to increase by 15% and Refinances to decline by 3%. MBA Chief Economist, Mike Fratantoni, believes that stronger growth, job gains, and declining unemployment will help fuel purchases in 2015.
The Consumer Price Index (CPI), which measures inflation on the consumer level, was also reported. Headline and Core CPI, which strips out food and energy prices, were both up 0.1%. On a year over year basis, Headline and Core CPI remained stable at 1.7%. Signs of inflation are still nowhere to be seen. We will receive the Fed’s favorite measure of inflation, the Personal Consumption Expenditures (PCE), on October 31st.
Yesterday, the 10-year Treasury Note Yield concerned us when it broke above 2.21%. And it has moved higher this morning to 2.24%. With the recent quick move up in Stocks, it would not surprise us to see the S&P 500 reverse course, especially with the several resistance levels above. We will see how this unfolds later today.