U.S. mortgage rates soared on Wednesday, as bonds sold off for the third straight day, reflecting continued weakness in markets. At the end of the day, yields on U.S. treasuries and German bunds hit their highest levels in 2015. Today’s bond selloff was fueled by multiple factors that drove investors to riskier assets than bonds. For one, reports surfaced that Greece and its creditors are moving closer to reach a deal this week. As we reported earlier this week, Greece’s debt payment is due on Friday. Another factor that moved European and U.S. markets today was European Central Bank President, Mario Draghi’s comments in a press conference, where he said that the ECB’s bond buying program will run in full force through September 2016. He stated that the stimulus program should help broaden the economic recovery in the Eurozone, as well as pushing up inflation from low levels. Furthermore, the president of the ECB claimed that investors should get used to higher volatility in the bond markets.
These headlines sparked a selloff in the European bond markets on Wednesday, that pulled U.S. bonds with them for a ride. The yield on the 10-year treasury note surged by 10 basis points to 2.366%, marking the highest closing level since last November. When bond pricing fall, yields rise and this is exactly what happened today. When the bond market takes a beating, it affects mortgage-backed securities (MBS) as well, which most directly influence mortgage interest rates. Lenders use MBS to determine mortgage rates on a daily basis and today was not a good day for MBS by any means.
Earlier today, the ADP Employment Report for May came out, showing a healty increase in private payrolls. According to the latest data, private employers added a total of 201,000 jobs this month, which is in line with the consensus expectation. Compared to March’s data, the private sector added 36,000 more jobs in May. While this is a positive report, showing that hiring is picking up in the private sector, it can’t be used to predict the outcome of Friday’s all-important Non-Farm Payrolls data.
Another piece of domestic economic data released on Wednesday showed, that the U.S. trade deficit declined sharply in April, as exports improved, due to a weaker dollar, while imports fell. The trade deficit decreased by 19.2% to $40.9 billion last month, comparerd to March’s $50.6 billion figure. Economists had projected a deficit of $44 billion. Although, this is another positive report, it has little to do with today’s sharp uptick in mortgage rates, as it appears that headlines from Europe are responsible for most of the damage.
Tomorrow we will get new data on weekly jobless claims, which will provide us more insights on the current state of the labor market. This week’s economic calendar includes two more very important events that could potentially shake up markets: the upcoming Non-Farm Payrolls data and Greece’s debt payment. And this also means that the worst might not be over for mortgage rates. If May’s NFP employment report contains some weak numbers and Greece fails to meet the payment to the IMF, we should see a rally in the bond market, which could eventually lead to an improvement in mortgage rates. However, if the the upcoming jobs data comes in with some strong figures and Greece’s debt problems are resolved, then mortgage rates will increase.
On Thursday, we will also see the release of Freddie Mac’s latest weekly mortgage survey. Considering the fact that the bond market took a heavy beating this week, it wouldn’t be surprising to see some uptick in national mortgage rates in the federal agency’s upcoming survey. The current average mortgage rate for the 30-year fixed mortgage is 3.87%, according to Freddie Mac’s data. This is the highest interest rate on record for the 30-year FRM in 2015.
Moving on to the latest mortgage rate quotes at some of the major U.S. lenders, at Quicken Loans the standard 30-year fixed refinance loan is currently published at a rate of 4.125%. The financial institution’s 15-year fixed home refinance mortgage is up for grabs at a rate of 3.125%, according to today’s loan information.
Over at Bank of America (NYSE:BAC), the 30-year refi mortgage is available today at a rate of 4.125%. The 15-year fixed mortgage remained stable on Wednesday, with the current interest rate hovering at 3.125%.
At Chase (NYSE:JPM), the long-term 30-year fixed conventional loan, which can be used for refinancing purposes, is coming out at 4.125% on Wednesday. The 15-year version of the lender’s home refinance mortgage is offered at 3.375%.
The above mentioned interest rates are subject to change and are not guaranteed. In order to search for live mortgage rate quotes from some of the top U.S. lenders, please click on the link below. To calculate your monthly mortgage payment, feel free to use our featured mortgage calculator.