Monday, June 6, 2016

Current Mortgage Rates for Monday, June 6, 2016

Last week mortgage rates were effectively flat until Friday morning’s labor report.  Freddie Mac’s Primary Mortgage Market Survey showed the average rate on a 30-year fixed-rate mortgage rose two basis points, to 3.66 percent with 0.5 points.  However, that number reflects conditions as they were early in the week, when most of the Survey responses were collected (the report is issued on Thursday and the responses are collected prior to Thursday).

Interest rates sat in a very narrow band from mid-May through Friday morning.  Yields on 10-year Treasuries floated between roughly 1.82-1.88% over that time frame.  On Friday morning, May’s employment numbers were published, and they were very disappointing (more on this later).  This caused bonds to rally, and 10-year yields fell by about 10 basis points over roughly 10 minutes.  this morning, yields on 10-years are around 1.72%. Mortgage backed securities rallied accordingly, and mortgage rates fell, but have since stabilized.

If you’re looking for a new mortgage, the weak jobs report worked in your favor.

Click here to get today’s latest mortgage rates.

Today’s economic data:

There’s really not much important economic data today.  We do hear from Fed Chief Janet Yellen, and it will be interesting to see if she changed her tune at all from when she spoke on the Friday prior to Memorial Day.  During that press conference, she said that she thought conditions would likely warrant a rate hike in the coming months (I’m paraphrasing here).

The week that was:

There was quite a bit of data issued last week, and the whole it was mixed, perhaps leaning more negative than positive.  We could pick through the minutiae, but suffice it to say that there was little to no market reaction to anything until Friday morning’s nonfarm payrolls report.  Many of the reports that I read anticipated that this report would be bad because the striking Verizon workers would be reflected in the May numbers (they’ve since struck and deal and are headed back to work).  However, it wasn’t anticipated to be as bad as it was.  It was anticipated that 158,000 jobs would be added in May, the actual print showed 38,000 jobs were added.  The prior two months were revised down by 59,000 jobs, for a net loss of 21,000 jobs.  It was the weakest report since the fall of 2010.

The Fed spent the past 2-3 weeks preparing the market for a rate hike at some point this summer.  The market took the Fed seriously and began to price in a hike.  Interest rates rose, with 10-year Treasury yields pushing close to 1.90%.  Fed Fund futures prices showed a better than 50% chance of a rate hike by July.  All of this was erased on Friday.  The implied probabilites of a hike in June, July, and September are now 6%, 35%, and 51%, respectively.  I doubt this pleases the Fed.  We will hear from Janet Yellen later today, and we could see a prompt reversal in the market if she comes out strongly in favor of a near-term hike, although I doubt she will be that explicit.

I’ve maintained for a while that it makes no sense for the Fed to hike in June.  The June meeting occurs only a few days before Britain will hold a referendum on whether or not to leave the EU.  Right now the polls indicate that the vote will be close, and the “leave” side appears to have taken the lead recently.  The point is that the vote could cause considerable market turmoil, and I don’t think the Fed wants to add to that.  I would not rule out a July hike, though.  Early this morning Boston Fed President Eric Rosengren, a noted dove, indicated that hikes are still coming despite the “choppy” employment numbers.  Stay tuned.

Don’t wait for rates to rise. Start your mortgage process now.

What’s the takeaway for rates this week?:

There’s not a lot of significant data on the agenda this week.  There are a series of Treasury auctions this week, $24 billion worth of 3-year Treasuries, $20 billion in 10-years, and $12 billion in 30-years.  $32 billion worth of Treasuries mature, so the market may need to make concessions for this supply.  Although it is worth noting that recent auctions have been met with strong demand.

Unless Yellen says something unexpectedly explicit today (e.g. “we think the May employment numbers are a fluke, and the market should prepare for a hike this summer”), I don’t think we’ll see rates change much this week.  We’re entering the pre-FOMC blackout period where the Fed members do not speak with the media, so this is the last we’ll hear from them until the June meeting, which concludes on the 15th.  I think that is the next major risk to rates.

Long story short, rates are favorable, and probably back down around three-year lows.  If you’re looking to refinance or to purchase a new home, now is a good time to lock in a low rate.  I still think it is more probable than not that we see rates rise as the year progresses.

Don’t wait for rates to rise. Start your mortgage process now.

Notable events this week:

Monday:

  • Janet Yellen speaks

Tuesday:

  • Productivity and costs
  • 3-Year Treasury auction

Wednesday:

  • Job openings and labor turnover survey
  • EIA petroleum status report
  • 10-Year Treasury auction

Thursday:

  • Weekly Jobless Claims
  • 30-Year Treasury auction

Friday:

  • Consumer Sentiment

Rates are still near record lows.  Contact us today to see if we can save you money on your home payments.



from Total Mortgage Underwritings Blog http://ift.tt/1X6Zdw9

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