Mortgage rates leveled off late last week, U.S. treasury prices dropped, while stocks finished the week on a positive note, as Minutes from the Fed’s last policy meeting, released on Thursday, bolstered expectations that the Fed may keep short-term rates at record-lows this year. Investors and traders flocked into stocks on Friday, and at the same time U.S. government bonds declined, leading to higher yields. Bond markets, which underlie mortgage interest rates, were a bit weaker in the second half of the week, as demand for ultra-safe fixed-income securities sapped, but current mortgage rates remain close to the lowest point since April.
The yield on the benchmark 10-year treasury note finished the week at 2.12%, which is essentially the same yield that it carried a day earlier. Currently, the yield on the 10-year treasury note is 13 basis points higher compared to data from a week earlier. The longer-term, 30-year treasury note closed Friday’s trading session at a yield of 2.94%, a decline of 2 basis points compared to data on Thursday. The yield on this type of treasury bond is now 12 basis points higher compared to data from a week ago. U.S. bond markets and banks will be closed on Monday, due to Columbus Day, while the stock market will be open.
Average mortgage rates remained historically low last week, according to Freddie Mac’s latest weekly Primary Mortgage Market Survey (PMMS) released on Thursday. The government-sponsored enterprise’s weekly survey showed, that the national mortgage rate on the benchmark 30-year fixed mortgage dropped 9 basis points to 3.76% last week. The average interest rate on the 15-year FRM eased as well, this type of mortgage loan averaged 2.99% last week, an improvement of 8 basis points compared to data from a week earlier. However, the it’s important to note, that this survey collects responses from mortgage lenders in the first half of the week, and it doesn’t take into account those economic headlines and events that happen in the latter part of the week, and could possibly impact mortgage rate movement.
The past week’s most influential event was the release of the Fed’s Minutes from its last policy meeting. The Minutes showed that Fed officials were almost ready to hike rates for the first time in nine years, but concerns over China’s economic slowdown and a low level of inflation forced the U.S. central bank to hold off on raising short-term interest rates in September. Also, some Fed members expressed concerns, that lifting rates too early could harm the central bank’s credibility. Policymakers of the U.S. central bank concluded that they are near their goal of full employment, however, they worry about inflation, which remains way below the Fed’s two percent target level. The Fed reiterated that they expect that conditions for a monetary tightening will be met before year-end.
The unfolding week’s economic calendar is going to be packed with a slew of fresh economic data, as well as some Fedspeak, as at least six central bank officials are scheduled to speak during the week. Now, some of the upcoming economic reports, especially the fresh retail sales and JOLTS figures, which are considered first-tier economic data, have the potential to move markets, thus having an impact on mortgage rates as well. On Wednesday, the Commerce Department will publish September’s retail sales report. Economists are projecting a climb of 0.2% for the upcoming retail sales data. Core sales, which exclude gas and auto categories, are projected to have increased 0.3% last month.
Another economic report, which will see the light of day on Wednesday, will include the latest Producer Price Index. The consensus expectation is a decline of 0.2% for September’s PPI.
The release of the Fed’s Beige Book on Wednesday may also garner some attention from traders and other market participants, as it will provide some information about current economic conditions.
Thursday will see the release of some key economic readings, including the Empire State Manufacturing Index for October. The consensus expectation is for a reading of -8.0. The same day the Labor Department will publish September’s Consumer Price Index. In August U.S. consumer prices declined 0.1%. Economists estimate a decline of 0.2% month-over-month for the upcoming CPI data.
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 dropped by 13,000 to a seasonally adjusted 263,000 in the week ended October 3. According to analysts, this week’s reading could show initial claims climbed by 7,000 to 270,000.
As far as regional manufacturing activity is concerned, the Philadelphia Fed’s Manufacturing Business Outlook Survey for October is coming out on Thursday. The latest estimations suggest that regional manufacturing activity in the Philadelphia region improved to -2.0 in October, from -6.0 in September.
September’s industrial production data will come out on Friday, and the latest projections show, that productions dropped 0.3% last month.
The Job Openings and Labor Turnover Survey for August is scheduled for release on Friday. The report will show if more workers are voluntarily leaving their jobs in hope to find find another one. In case the report turns out positive, it will indicate that workers have more confidence in the job market. The most recent JOLTS report for July, showed job openings hitting a new record high of 5.75 million.
The preliminary reading of of the University of Michigan’s Consumer Sentiment Index for October is another key economic data, which will see the light of day this week. If the new outlook shows some improvement compared to September’s figure (87.2), it could signal that Americans are more upbeat about the U.S. economy.
Coming back to mortgage interest rates, although rates have somewhat worsened late last week, they are still hovering near record-lows. If you are interested in buying a home or refinancing your current mortgage, this is certainly a good time to do so. With the Fed’s rate hike plans are looming, nobody knows how long current mortgage rates are staying near record-lows. If you are risk-averse, it could pay off to lock in the lows, while if you’re a gambler, you can always float to see whether mortgage rates could fall leven lower.
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