Following the release of some weaker-than-expected domestic economic data, mortgage rates improved modestly on Thursday. Pricing on mortgage-backed securities (MBS), which most directly influence interest rates, increased and yields ticked down. The bond market strenthened ahead of the holiday weekend, as a set of weak economic data bolstered speculation among investors that the Federal Reserve may delay its planned interest rate hike. The only bright spot among today’s economic reports was the weekly jobless claims data, more on that later. The yield on the benchmark 10-yeat treasury note finished at 2.214% today, compared to 2.25% on Wednesday. When bond yields fall, pricing on them increases, and this is exactly what happened today. With regards to today’s mortgage rates, you may see some slight improvements in rates at select lenders, while at others, rates most likely will look the same as on Wednesday.
It seems that Thursdays have been favourable for bond markets over the last couple of weeks. Since April 9, pricing on bonds were up at each and every Thursday and today is no exception. Mortgage bonds had a nice rally early in the morning, then took a step back, following the release of the latest weekly jobless claims report. All signs point to a strengthening in the labor market, as unemployment benefits droped over the last four weeks to a 15-year low. The number of Americans filing for unemployment benefits increased by 10,000 to a seasonally adjusted 274,000 last week, hitting the highest level this month. The consensus expectation was for a reading of 270,000.
Still, the four-week average for initial jobless claims declined to 262,250 from 271,250 in the period ending May 16, according to the Labor Department’s figures. As we mentioned above, this was the only positive domestic economic report that came out today. After the release of the jobless claims data, bonds bounced back to flat levels.
However, later on bonds have gained due to some weaker-than-expected manufacturing and home sales data. The National Association of Realtors reported on Thursday, that the sales of previously owned homes decreased 3.3% in April to a seasonally adjusted annual rate of 5.04 million, following a spike in March. The figures for March was revised up to 5.21 million from the previously reported 5.19 million, the group said. According to a recent survey conduced by The Wall Street Journal, economists had forecast an increase to a pace of 5.24 million for last month’s existing home sales data. Earlier this week, a strong housing starts report came out, signaling a positive change in the industry. However, today’s weaker existing home sales data may raise some doubts among analysts about the rebound of the housing market.
Manufacuring activity in the Philadelphia region improved modestly in May, coming in at 6.7, falling short of the consensus expectation of 8. This month’s figure is down compared to March’s reading of 7.5.
A different report from Markit Economics showed, that the preliminary reading for U.S. manufacuring activity slowed this month. The Markit manufacturing purchasing managers index dropped to 53.8 this month from 54.1 in April. New orders growth softened for the second straight month, marking the slowest pace since January 2014. Exports sales ticked down as well, indicating that the strong dollar is holding back the economy.
On the other hand, Freddie Mac’s latest Primary Mortgage Market Survey (PMMS) revealed, that the average rate on the 30-year fixed mortgage improved a hair this week, coming in at 3.84% compared to 3.85% in the prior week. The highest reading in Freddie Mac’s survey was 3.86% this year. The average rate on 15-year fixed loans was slight lower this week, As per the mortgage-buyer’s findings, this type of loan averaged 3.05% during the week, which translates to 2 basis points improvement compared to last week’s reading (3.07%).
Overall, the current weak economic data should help pushing up bond prices and eventually mortgage rates could benefit, although we have seen little evidence for that in the last couple of weeks. Also, as markets are closing earlier tomorrow, we may not see too much movement. And as mortgage rates tend to remain steady ahead of holiday shortened weekends, it’s ultimately your decision whether to lock a rate ahead of the weekend or float until Tuesday in hope that mortgage rates will head lower.
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