Last week bonds rallied and mortgage rates fell. The most recent Primary Mortgage Market Survey from Freddie Mac showed the average rate on a 30-year fixed-rate mortgage to be 3.61% with 0.6 points. The survey came out last Thursday, and the majority of the survey results were collected earlier in the week. Ten-year Treasury yields ranged between 1.80-1.87% between Monday and Wednesday, and dipped as low as 1.72% by Friday. Presently yields are around 1.77%. Mortgage backed securities rallied along with Treasuries, but underperformed somewhat. The point of this is that mortgage rates continued to fall after the survey was published, so rates are a touch lower than what the survey showed on Thursday.
Right now mortgage backed securities are rallying, and rates are under some downward pressure.
Click here to get today’s latest mortgage rates.
Today’s economic data:
There is no significant economic data today.
The week that was:
The main even last week was the April jobs report. The report was generally disappointing. It was anticipated that the economy would add 200k jobs, the actual print showed that the economy only added 160k. The previous two months were revised down by 19,000 jobs. Headline unemployment was steady at 5.0%, just over the expectation of 4.9%. The labor force participation rate fell from 63% to 62.8% – so the unemployment rate stayed the same while people left the workforce. Average hourly earnings were up by 0.3%, which is the bright spot in the report.
With the general weakness in the jobs report, you might have anticipated that bonds would rally, and mortgage rates would drop. This didn’t really happen. We saw a brief rally, with no real follow-through, and yields pretty much remained static. On the whole, last week’s economic data was on the weak side, which has been a theme lately.
Don’t wait for rates to rise. Start your mortgage process now.
Looking ahead:
There’s not a lot on the horizon this week in terms of scheduled events and data, which is usually the case after the week after the jobs report comes out. That said, there are a number of things for us to watch this week:
- Greece and its problems with debts are flaring up again. In order to show its creditors that it is serious about reform, and to unlock additional bailout funds, the Greek parliament passed further austerity measures over the weekend. Protests resulted. Greek Prime Minister Alex Tsipras is calling for debt relief at a Eurozone meeting today. German Finance Minister Wolfgang Schaeuble that he does not expect a final decision today, but that he is confident a deal will be made in May. Last time we dealt with this issue, we saw bonds rally due to a flight to safety under fears that a Grexit could cause the collapse of the Eurozone. We’ll see if the powers that be can keep this under control this time. Stay tuned.
- There’s a bunch of Fedspeak this week. This morning Chicago Fed President Charles Evans said that the Fed should consider allowing inflation to rise above the 2% target in order to promote growth, and that “in my opinion, the continuation of a ‘wait and see’ monetary policy response is appropriate.” Evans is a dove and a non-voter, so take it for what it’s worth. A tangentially related article from Bloomberg yesterday: “Bill Gross, Mohamed El-Erian Warn Against Counting the Fed Out.”
- In what will surely become a political football in the Presidential election, pressure is mounting on Congress to do something about the debt crisis in Puerto Rico.
- On June 23rd the U.K. will hold a referendum on whether or not to leave the Eurozone. The polls show that the vote will be close, and the rhetoric is amping up. This morning we have this: “EU referendum: Cameron warns UK exit could put peace at risk.” The timing of the referendum compared to the timing of the next Fed meeting (June 23rd versus June 14-15 for the Fed meeting) is another reason to doubt the Fed will hike in June.
- There’s a number of Treasury auctions this week, as well as this possibility of a lot of corporate bond supply. The market may need to make concessions for the supply, which could cause yields to rise.
- There are more signs that Chinese growth is slowing. Last summer, concerns of slow growth in China caused a global stock market rout. I don’t know that we will see a redux of that situation, but problems in China are just one more ingredient in the stew of global developments that the Fed is monitoring as it tries to decide when it will be appropriate to hike again.
There are a lot of things to monitor this week, but unless there is a large development somewhere, I don’t think we will see rates deviate much from current levels in the week ahead.
Click here to get today’s latest mortgage rates.
What’s the takeaway for rates?:
I’ve been saying the same thing in this section for months. Rates are very, very low. Rates are about as low as they have been since the beginning of the year. To put it in historical perspective (all numbers are from Freddie Mac’s Primary Mortgage Market Survey): 30-year rates are now averaging 3.61% with 0.6 points. The lowest reading I can find since the survey began was in November of 2012, when 30-year rates were at 3.31% with 0.7 points. So rates are not that far above the lowest reading of all time, which occurred during unprecedented stimulus from the Federal Reserve.
Could rates go lower? Sure, I suppose they could. However, the Fed seems intent on normalizing monetary policy by hiking rates. Whether or not they follow through on this is anyone’s guess. As discussed above, the markets are discounting that possibility, but the Fed keeps saying they are going to hike. At some point, if they want to maintain any sort of credibility, they are going to have to hike, or change their collective tune.
The point is: rates are more likely to rise than to fall in the future. I can’t say at what point in the future, because I’m not a mystic. And I realize people have been predicting that interest rates will rise for several years, and have consistently been wrong. But I would urge you not to attempt to time the market. If it makes financial sense for you to refinance now, you should do it. If rates were to drop significantly, you could refinance again. If rates rise, you’re stuck.
Here’s a hilariously stupid (and dangerous) idea:
This is not a political blog (oh, how I wish it were). However, I feel it is necessary to call attention to what may be one of the dumbest ideas I’ve heard in quite some time. That this idea stands out in a campaign season that has been marked by an unusual amount of stupidity is fairly remarkable. Anyway, this is at least tangentially related to mortgage rates because it would utterly destroy the U.S. Treasury market, amongst other things. From the New York Times’ Binyamin Appelbaum: “Donald Drumpf’s Idea to Cut National Debt: Get Creditors to Accept Less.”
The United States of America is not some banana republic, nor is it a failing casino. While we’re persuading our creditors to “accept less,” maybe we can get them to give us a hand with that wall.
Don’t wait for rates to rise. Start your mortgage process now.
Notable events this week:
Monday:
- Fedspeak
- Treasury auctions
Tuesday:
- Job Openings and Labor Turnover Survey
- Treasury auctions
Wednesday:
- EIA Petroleum Status Report
- Treasury auctions
Thursday:
- Weekly Jobless Claims
- Treasury auctions
- Fedspeak
Friday:
- Retail Sales
- Producer Price Index – Final Demand
- Fedspeak
from Total Mortgage Underwritings Blog http://ift.tt/1Ty2zlB
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