Last week there was some day-to-day volatility that ultimately ended up really meaning nothing. Freddie Mac’s Primary Mortgage Market Survey saw mortgage rates drop ever-so-slightly, with the average rate on a 30-year fixed-rate mortgage ticking down from 3.59% with 0.5 points to 3.58% with 0.5 points. However, the survey is released on Thursday, and the bulk of the survey results are collected early in the week. On Tuesday and Wednesday, Treasuries sold off a bit, and mortgage rates rose a little bit, so the Freddie Mac number was always a little bit ethereal.
However, the situation reversed last night, and Treasury yields are back down a bit. We’re really sort of splitting hairs, though. Since the beginning of April, yields on 10-year Treasuries have bounced between 1.70-1.80%. Mortgage rates have been similarly stable. Really, mortgage rates have been quite stable since the beginning of February, sitting between the low of 3.58% and a high of 3.73% (per Freddie Mac, both with 0.5 points).
Bond markets have been reacting primarily to perceptions about the Fed, overseas influences, momentum, and swings in stocks (all of these, admittedly interrelated). The domestic data doesn’t seem to be having too much of an impact on day-to-day market movement. This has been the situation pretty much all year, and it looks to continue for the near term.
Click here to get today’s latest mortgage rates.
Today’s economic data:
There is no significant domestic economic data today – and very little significant data this week.
The week that was:
If the opening paragraph didn’t make it clear, there wasn’t a lot that happened last week. Treasuries sold off a bit during the week, probably some part of that was due to profit-taking after a couple weeks’ of rallies, and part of it was also a reaction to stocks rallying. The stock rally was at least partially premised upon the idea that OPEC would freeze oil prices, boosting energy prices. More on this in a bit.
Anyway, the sell-off didn’t really follow-through. Yields rose on Tuesday-Wednesday, and basically sat there for the rest of the week. Presumably the market is waiting on the Fed, or news that changes perceptions about when the Fed will hike. If that’s the case, we may be waiting for quite a while, though. In the meantime, we’ll see the bond markets influenced by swings in stocks, overseas events, and changes in energy prices (or events that cause energy prices to move). Which is a decent lead-in to the OPEC + Russia meeting where it was anticipated that oil output would be frozen (spoiler alert: it wasn’t).
So here’s the deal with the meeting of 18 oil producing countries (OPEC + Russia and a few others): when oil plunged earlier in the year, the idea was kicked around that many oil producing companies would freeze oil production – assuming that the others would play nice and sign onto the deal. The key to the deal was for the Iranians to sign on, something which they indicated ahead of time that they would not do. The talks fell apart last night without a deal. Check out this snippet from Reuters, which I think encapsulates the situation nicely:
“A deal to freeze oil output by OPEC and non-OPEC producers fell apart on Sunday after Saudi Arabia demanded that Iran join in despite calls on Riyadh to save the agreement and help prop up crude prices.
The development will revive oil industry fears that major producers are embarking again on a battle for market share, especially after Riyadh threatened to raise output steeply if no freeze deal were reached.
Iran is also pledging to ramp up production following the lifting of Western sanctions in January, making a compromise with Riyadh almost impossible as the two fight proxy wars in Yemen and Syria.”
The emphasis is mine. So you’re saying that two countries, fighting proxy wars, on opposite sides of a 14 century religious schism, located in the one of the world’s least stable areas, are having trouble reaching an agreement? You could knock me over with a feather. In any case, oil fell, and bonds rallied a bit. If oil continues to fall, bonds (and mortgage rates) will probably benefit. For more reading, the New York Times had a nice piece on this yesterday.
Last week’s economic data was mixed, but seemingly had little impact on the markets, so the less said, the better. Let’s just say there is nothing in the data that is screaming for a Fed hike in April, and probably not in June.
Don’t wait for rates to rise. Start your mortgage process now.
Looking ahead:
Yeah, there’s not much on the horizon this week. Looking ahead to next week, we have a Fed meeting, but there is almost no chance that we see a rate hike, or even any significant change in tone from the Fed. The implied probability of a hike from Fed Fund futures prices? 1%. The implied probability of a hike in June is just 16%. Based on the futures, there is just a 50% chance of a hike this year. I still think that we are going to see a hike sometime in the second half, even if we continue to see tepid inflation and no wage growth. As much as the Fedspeak has indicated that a hike will be data-dependent, I think the Fed will move sometime in the second half, if for no other reason than to maintain credibility (recall that at the beginning of the year, 3-4 hikes were predicted – thusfar we’ve seen one).
Click here to get today’s latest mortgage rates.
What’s the takeaway for rates?:
Mortgage rates are favorable, at or just above the lows of the year. I doubt we see much change in the near future, aside from the usual fluctuations, 10 basis points here, 10 basis points there. As long as we’re left reacting to foreign developments, the Fed, and stocks, I don’t think the market is going to pick a direction – it’ll more be short-term fluctuations.
That said, you never know when something is going to come out of the blue an up-end things. I don’t recommend trying to time the market. If you’re looking to refi and can save money now, I’d recommend acting now. If you’re looking to purchase a home, now is a great time to do so.
Don’t wait for rates to rise. Start your mortgage process now.
Notable events this week:
Monday:
- Fedspeak
Tuesday:
- Housing Starts
Wednesday:
- Existing Home Sales
- EIA Petroleum Status Report
Thursday:
- Philly Fed Business Outlook Survey
- Weekly Jobless Claims
Friday:
- PMI Manufacturing Index Flash
from Total Mortgage Underwritings Blog http://ift.tt/1raeoYB
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