Mortgage Rates Today, Nov. 12, 2024: "Giddy" Wall Street Could Send Mortgage Rates Either Way This Week

In brief

"Trump victory leaves Wall Street giddy" was a headline in this morning's Financial Times. And that seems a reasonable assessment.

Sure, we're seeing some obvious Trump trades in action: Tesla stocks and those in oil companies have soared. Indeed, stock indexes generally have done well, as has Bitcoin.

However, Bloomberg this morning reported, "Stocks paused their advance on Tuesday amid signs the rally had left valuations overextended and as investors weighed the potential policy impact of Donald Trump’s cabinet picks."

Regarding mortgage rates, we care much more about bonds than stocks. Those rates are largely determined by yields on mortgage-backed securities, a type of bond.

And those yields have moved surprisingly gently since the presidential election result. They fell appreciably overall last week, with the day of the result bringing the only (moderate) rise.

You might ascribe that to Wall Street's genius and prescience in positioning itself perfectly for President-elect Donald Trump's victory. Or you may put it down to giddiness.

However, the longer term is looking less rosy. Last week, The New York Post ran an article under the headline, "Mortgage rates could remain stubbornly high after Trump win — here’s why." Scroll down to read our fears for mortgage rates over the longer term.

Still, in the shorter term, things might continue to settle down. We're due a couple of major economic reports, the first tomorrow and the second on Friday.

And they may well cause mortgage rates to rise or fall, depending on what they say. Read on for more details.

Coming up

Mortgage rates today

In terms of economic reports, today brings only the small business optimism index from the National Federation of Independent Business (NFIB). But that's a report that rarely affects mortgage rates much.

Three senior officials of the Federal Reserve have speaking engagements today. And markets will be eager to hear how they think the presidential election result could affect future cuts to general interest rates.

Tomorrow

Consumer price indexes (CPIs) were until recently the most important economic reports in most months. But that's less true now because investors widely agree that inflation is back under control.

Price indexes comprise four main elements. Two cover the reporting month (October). And the other two measure year-over-year (YOY) price changes (Nov. 1, 2023-Oct. 31, 2024).

Why two reports for each period? Well, the first is the standard index, measuring all surveyed prices in each period. The second is "core" CPI, which excludes gas and energy prices. Eliminating those, which are especially volatile, reveals the underlying trend.

Here's what MarketWatch says markets are expecting from tomorrow's CPI:

• October CPI — 0.2%, unchanged from September's figure
• YOY CPI — 2.5%, up very slightly from September's 2.4%
• October core CPI — 0.3%, unchanged from September's figure
• YOY core CPI — 3.33%, unchanged from September's figure

If tomorrow's figures come in as expected, mortgage rates might barely move in response. If they're higher, that could exert upward pressure on those rates. And lower-than-expected numbers could exert downward pressure.

There are four top Fed officials with speaking engagements tomorrow. And we're also expecting the monthly federal budget.

Later in the week

We're due the producer price index on Thursday, which is the CPI's little sibling. And Fed Chair Jerome Powell has a speaking engagement that day. When he speaks, markets listen.

Friday's retail sales figures may well rival the CPI for this week's most important report. So, stand by for that.

We'll brief you more fully on each of the more important economic reports before the data are published.

Why we're gloomy about long-term mortgage rates

We're concerned that many of the president-elect's stated plans could have negative implications for long-term mortgage rates. While campaigning, he suggested he'd get them back down below 3%. But we can't see how short of a deep recession.

Perhaps he was thinking about his plan to take more control of general interest rates by sidelining (some of Trump's leading supporters have advocated abolishing) the Fed. All markets are likely to take such a move badly.

In its DealBook e-newsletter on Saturday, The New York Times said, "The president-elect has vowed to escalate tariffs, extend a corporate tax cut and introduce tax breaks on tips and Social Security benefits, policies that some fiscal hawks worry would increase the federal deficit, and with it, inflation. But even if Trump faces meager resistance on Capitol Hill, another force may temper his policies: the bond market."

On top of that, Trump's plans to deport millions of undocumented immigrants could further raise the deficit. One report recently suggested that " ... an effort to arrest, detain, process, and remove one million undocumented immigrants per year would cost the U.S. government at least $88 billion per year, ultimately adding up to nearly one trillion dollars in taxpayer costs."

Meanwhile, Minneapolis Federal Reserve President Neel Kashkari and others expect removing millions from the workforce would push up labor costs (and therefore inflation) as employers try to replace illegal migrants by attracting citizens and documented workers.

Global bond markets hate high inflation and overextended deficits wherever they see them. A couple of years ago, British Prime Minister Liz Truss was unceremoniously ejected from office after just 45 days when she presided over a budget that risked blowing up the UK deficit.

Under our Constitution, that couldn't happen to the president-elect. But bond markets could effectively cut up the nation's credit card. And mortgage rates could soar.

Yes, they could fall later, perhaps to below 3%. But, in our view, only if the economy has tanked and we're in the midst of a savage recession.

Neither bond markets nor we are politically motivated. And nobody is questioning the president-elect's democratic mandate. But it is our job to faithfully report how we perceive likely trends in future mortgage rates.