Mortgage rates remained largely unchanged at the end of the holiday-shortened week, as bond markets closed early on Friday, showing little movement in bond prices. Mortgage-backed securities (MBS) were flat on Friday, and as a result most lenders retained those rate sheets from Wednesday, while others made only very slight adjustments to loan pricing. Among mortgage lenders the most prevalently quoted 30-year fixed mortgage rate is in the range of 4.000% and 4.125% as we are approaching the last month of the year. Current mortgage rates are rising amid expectations that the U.S. central bank will raise short-term rates at its upcoming policy meeting in December.
In the secondary market, the 10-year treasury note, which is a bedrock of global finance, finished the holiday-shortened week at 2.22%, which translates to a 1 basis point decline compared to Wednesday’s data. On the other hand, the 30-year treasury yield closed the trading day at 3.00%, unchanged compared to data from the mid-week.
Average rates on long-term 30-year conventional mortgages eased nationwide last week, according to Freddie Mac’s weekly Primary Mortgage Market Survey (PMMS). According to survey responses from lenders, they were offering 30-year fixed mortgages at a rate of 3.95% on average last week, which marks a 2 basis points downtick compared to the prior week’s data. The average interest rate on the 15-year fixed mortgage stayed intact at 3.18% during the past week.
Following a rather silent week in terms of economic data, the unfolding week’s economic calendar includes a slew of influential reports, which can impact mortgage interest rates big time. Without a doubt, the highlight of the week is going to be November’s jobs report, which is scheduled for release on Friday. The Fed is paying a great detail of attention to the monthly Non-Farm Payrolls report, which provides an accurate picture on employment situation. Besides its impact on financial markets, the upcoming NFP report could also have a big influence on whether the Fed will take action in December, and hike rates for the first time in nearly a decade.
Furthermore, the week ahead will be packed with plenty of Fedspeaks, which may shed some light on U.S. policymakers thinking when it comes to monetary policy and economic outlook. Ten Fed members will speak during the week, including Fed Chairwoman Janet Yellen. While expectations have hardened since mid-October, that the central bank will lift rates before the end of the year, it seems the attention is now shifting to the pace of rate hikes going forward. The upcoming Fedspeaks may give investors and traders some clues about the Fed member’s stance on the pace of rate hike.
Coming back to the U.S. economic calendar in the week ahead, this Monday three pieces of data came out. Economic activity in the Midwest region contracted this month, the latest Chicago PMI showed. The Chicago Purchasing Managers Index for November fell to 48.7, significantly missing the consensus expectation of a 54 reading. New orders dipped to the lowest levels since March, and as a result the index fell into contraction territory. This is not a good report by any means, indicating that manufacturing and overall business conditions in the Chicago region have worsened lately.
Next up is pending home sales for October. According to a fresh report by the National Association of Realtors, contracts to buy previously owned U.S. homes edged up 0.2% to 107.7 last month, indicating a modest rebound in the real estate market, but missing forecasts of a 1% increase month-over-month.
Manufacturing activity in the Texas region improved in November, according to the latest Dallas Fed Manufacturing Survey released today. This month’s manufacturing index came in at -4.9, which is better than the projected -10. While the current data signals some improvements in manufacturing activity in the Texas region, the index remained in contraction territory for the eleventh consecutive month.
Markit Economics’ U.S. Manufacturing PMI for October likely slipped to 52.6 from 54.1, according to the latest estimations. Fresh data on U.S. manufacturing activity by Markit will be released on Tuesday.
Another economic report which is going to be released on Tuesday is the ISM Manufacturing Index for November. Economists believe, that manufacturing activity likely expanded at a modest pace this month, with the latest estimations pointing to a reading of 50.5, an uptick compared to 50.1 in October.
We will also get some new data on the housing market, which is one of the bright spots of the economy in recent months. The Commerce Department will release its monthly construction spending report on Tuesday, and according to analysts, construction activity likely grew 0.6% in October, after hitting a seven-yearh high in September.
The ADP Private Employment Report for November is set to be released on Wednesday, two days earlier than the all-important NFP data. The November ADP private sector data is expected to show an increase of 190,000 jobs, compared with 182,000 in October.
During the mid-week, the Fed’s Beige Book will see the light of day, which may also garner some attention from market participants, especially that the market is widely expecting a rate increase before the end of 2015. The Beige Book provides information about current economic conditions from the Fed’s perspective.
On Thursday, the Labor Department will publish a fresh reading on jobless claims, which will provide us information about the current state of the labor market. According to the latest projections, initial claims for unemployment benefits likely increased by 9,000 to 269,000 from a week ago.
Financial firm Markit will publish its U.S. Services PMI for November on Thursday. According to the latest forecasts, the services sector likely expanded this month.
Fresh figures on factory orders, covering the month of October will be released by the Commerce Department on Thursday. Analysts expect a 1.2% increase in orders for October. Back in September new orders for U.S. manufactured goods dropped 1%.
November’s ISM Non-Manufacturing Index likely fell 1.9 basis points to 58, economists say. This type of services data is set to be released on Thursday.
After a huge jump in payrolls in October, the upcoming jobs data will likely show that U.S. companies added 200,000 non-farm payrolls in November. If the report comes with some better-than-expected figures, it could encourage the Fed to go ahead with the rate liftoff in December. On the other hand, a worse-than-expected NFP report may cause some headwinds going into the next FOMC meeting.
While all the above mentioned reports may influence mortgage interest rates in one way or another, the key release of the week is going to be November’s jobs report. Low mortgage rates are in danger, provided that November’s jobs report comes with some strong numbers. With all that said, if you are averse to risk and expect mortgage rates to rise in the near future, it’s better to lock a rate sooner rather than later.
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