Mortgage rates bounced back late last week due to a rally in the bond market, following one of the biggest single-day increase in interest rates on Thursday. The all-important Employment Situation report for November came out on Friday with better-than-expected figures, however, the data turned out to be not too significant for the bond market. Clearly, the market became oversold on Thursday and as a result mortgage interest rates had some room to recover on Friday.
Actually, rates took back almost half of Thursday’s losses on Friday, however, in terms of loan pricing most of the lenders haven’t passed along all the gains just yet. This is normal behaviour from mortgage lenders on days, when mortgage rates start recovering following a big spike. Currently, the most prevalently quoted 30-year fixed mortgage rate is 4.125% among the majority of lenders, an increase compared to 4.000%, which was the most prevalently quoted 30-year mortgage rate a few weeks back.
The 10-year treasury note, which is a bedrock of global finance, closed Friday’s trading session at a yield of 2.28%, which translates to a decline of 5 basis points. The yield on the longer-term 30-year treasury note dipped to 3.01%, a 6 basis points downtick compared to data from Thursday.
At the beginning of the new week pricing on mortgage-backed securities (MBS), which lenders use to determine daily mortgage rates, is on rise, U.S. treasury bonds are strengthening, while equities are falling. In case MBS pricing remains positive, we may see some improvements in mortgage rates at the end of the day.
National mortgage rates improved last week, according to Freddie Mac’s latest weekly Primary Mortgage Market Survey (PMMS). The government-sponsored agency’s weekly survey showed, that the average interest rate on the 30-year fixed mortgage edged down to 3.93% nationwide in the week ended December 3. A week earlier this type of mortgage was hovering at 3.95%. In case of the shorter-term, 15-year fixed loan, the current average rate is 3.18%, an improvement of 2 basis points compared to data in the prior week.
With regards to the unfolding week’s economic calendar, it’s going to be light on influential data. Still, we will get some important domestic economic reports including fresh data on retail sales, a new JOLTS report as well as a fresh reading on producer prices amongst others.
This Monday is going to be silent in terms of economic data, so the market will likely be influenced by Friday’s big jobs report as well as overseas events. The Job Openings and Labor Turnovery Survey (JOLTS) for October is scheduled for release on Tuesday. In case the report turns out positive, it will indicate that workers have more confidence in the job market. Economists estimate that job openings likely increased modestly to 5.54 million in October. The most recent JOLTS report for September showed job openings rising to 5.5 million from 5.37 million in August.
Fresh jobless claims data, which is scheduled for release on Thursday, will provide us information about the current state of the labor market. The latest data released by the Labor Department last week, showed that initial claims for unemployment benefits increased by 9,000 to a seasonally adjusted 269,000 in the week ended December 3. Despite the uptick, U.S. jobless claims are still at historically low level, a positive sign for the economy. According to analysts, this week’s reading could show initial claims declined by 1,000 to 268,000.
One of the highlights of the week will be the new reading on retail sales, which is set to be released on Friday. If the upcoming retail sales data turns out solid, it could signal that the economy is gaining traction in the fourth quarter. The latest retail sales reading from October was a disappointing one, indicating a 0.1% increase. Core retail sales, which don’t include automobiles and gas, inched up 0.2% in October. For November’s data, analysts estimate an uptick of 0.3%.
November’s producer price index (PPI) is going to be released on Friday. Overall, the producer price index shows the prices that businesses receive for their goods and services. Last month, the Labor Department said that producer prices dropped 0.4%, marking the second straight month that prices are falling. The consensus expectation is a flat reading for the upcoming PPI, and an increase of 0.1% for the core PPI, a key indicator which excludes the volatile food and energy categories.
The preliminary reading of of the University of Michigan’s Consumer Sentiment Index for December will come out on Friday. Economists believe that the index likely climbed to 92.0 this month. If the new outlook shows some improvements compared to November’s figure (91.3), it could signal that Americans are more upbeat about the U.S. economy.
In other news, a top Fed official expressed his support to raise the benchmark federal-funds rate at the upcoming FOMC meeting next week. Atlanta Fed President Dennis Lockhart, who is a voting member on the Fed’s policy-setting committee, told The Wall Street Journal on Monday that he is „ready for a decision to lift off”, as he believes the criteria set by the U.S. central bank regarding when to raise rates „have been substantially met”. The Fed has been pursuing a zero-rate interest rate policy for almost seven years now and the last time the central bank hiked rates was back in 2006.
Lately, a number of U.S. policymakers called for a rate hike and the market also expects a liftoff in December. According to the CME FedWatch tool, which is a used by investors to predict future monetary policy, market pariticpants see a 79% chance of a rate hike at the next Fed meeting. Right now, all things point to a rate liftoff in December, which means that borrowers, who are looking to get a new mortgage and want to avoid the possibility of higher interest rates, may want to consider locking a rate sooner rather than later.
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