The Bond markets bounced up and down last week, but when it was all said and done, mortgage rates were roughly unchanged. The yield on 10-year Treasuries started the week around 1.62%, dipped as low as 1.54%, and ended the week just shy of 1.60%. Mortgage backed securities followed a similar trajectory. Last week’s Primary Mortgage Market Survey from Freddie Mac reported the average rate on a 30-year fixed-rate mortgage was 3.42% with 0.5 points. The survey reflects conditions as they were early in the week when the responses are collected. The current average rate is likely a couple of basis points higher than the rate reported by Freddie last Thursday.
The main event that could move mortgage rates this week is the September employment report, which is released on Friday morning. Until that time, I think the most likely scenario is that rates float around current levels.
Click here to get today’s latest mortgage rates.
The week that was:
Here’s an overly simplistic explanation but roughly for last week’s market movement: it was caused in large part by concerns over the financial health of Deutsche Bank. These are not new concerns. The IMF published a lengthy study in June that highlighted the risks that troubles at Deutsche Bank could pose to the global economy. When Bloomberg reported on Thursday that a number of hedge funds were reducing exposure to Deutsche Bank, there was a general flight to safety as other investors made similar moves. Bonds rallied and stocks sold off. Shares of Deutsche Bank hit record lows with memories of Lehman Brothers still fresh in the minds of many (although that may not be an entirely apt comparison). One of the reasons that investors backed away from Deutsche Bank is a pending $14 billion claim against it by the U.S. Department of Justice over the sale of mortgage backed securities during the mortgage crisis.
On Friday, there were reports that the DOJ and Deutsche Bank were close to agreeing on a settlement figure of $5.4 billion rather than $14 billion. Stocks rebounded, bond sold off, and the prior day was effectively reversed. The settlement has not been officially announced, and if it does not we could very easily see more market volatility this week.
It’s probably worth noting somewhere that it is very much in the interests of both the U.S. and German governments that DB is perceived as being financially sound. I would think that the chances of some sort of settlement being reached are likely pretty high. That does not really address the much larger underlying issues that are at play here, but it would likely allay the markets in the short term.
The rate outlook:
In addition to any developments in the Deutsche Bank situation, the week ahead features a number of Fed speakers and a fair amount of economic data, including the September employment numbers which are released Friday morning. The employment numbers are one of the key indicators that the Fed looks at when determining the future course of monetary policy. At the last Fed meeting interest rates were left unchanged, but three voters dissented from the statement in favor of an immediate rate hike. The doves are holding off the hawks on the FOMC for the time being, but barring a market downturn, it seems probable the hawks will get their way and we will see another hike before the end of the year.
The November Fed meeting occurs just days prior to the presidential election, so a hike at that meeting is pretty much off the table. The probability of a hike at the December meeting is currently up to about 63% as implied by the prices of Fed Fund futures.
So we could see the markets move on the tone of this week’s Fedspeak as well as the strength or weakness of the economic data – in particular the jobs report. I doubt we’ll see any large changes in mortgage rates this week, probably just the normal gyrations that we see on a day-to-day basis.
Either way, rates have been sitting at or close to historic lows for an extended period of time now. Its still a great time to look into refinancing if you presently have a mortgage. If you’re buying a house in the near future, you’ll have the chance to lock in a very low rate. It remains an excellent time to get a mortgage.
It’s time to see if you can save money. Contact us now.
from Total Mortgage Underwritings Blog http://ift.tt/2dDO0Vj
No comments:
Post a Comment