Mortgage rates were moving sideways on Wednesday, equities gained, while government bonds pulled back, even though the U.S. government’s 10-year note auction saw a strong demand, which helped the bond market recoup some of the losses. The government auctioned $21 billion 10-year notes on Wednesday, which attracted the strongest overseas demand in four years. Pricing on mortgage-backed securities (MBS), which ultimately impact the direction of mortgage rate movement, was slightly down yesterday. Still, current mortgage rates are hovering near such low levels, that we haven’t seen since April. The average lender is quoting the 30-year fixed mortgage rate in the range of 3.75% – 3.875%, which is considered quite attractive compared to rates a few months back.
In the secondary market, the yield on the benchmark 10-year treasury note drifted higher to 2.08% on Wednesday, a 3 basis points increase compared to data from Tuesday. As far as the long-term, 30-year treasury yield is concerned, it ticked up by 1 basis point to 2.89% during Wednesday’s trading session.
This Thursday morning MBS is essentially flat, but the Minutes from the Fed’s September 16-17 FOMC policy meeting, which is scheduled to be published later today, has the potential to significantly impact markets. The Minutes will provide some additional inisight into the Fed members’ thinking, how they reached the decision to pass on increasing short-term rates in September.
National mortgage rates plummeted this week, as a result of a poor Non-Farm Payrolls report, according to Freddie Mac’s weekly Primary Mortgage Market Survey (PMMS) released earlier this Thursday. The government-sponsored enterprise’s latest data showed, that the average rate on the 30-year fixed mortgage eased to 3.76% this week, which marks a 9 basis points improvement compared to data in the prior week. The same time a year ago, the 30-year FRM averaged 4.19%. The McLean, VA-based mortgage-buyer’s survey also revealed, that the average rate on 15-year fixed mortgages dropped to 2.99%, down from last week, when they carried 3.07%. At this time a year earlier, the 30-year FRM averaged 3.36%.
According to the latest national mortgage data, the average interest rate on the flexible 5-year adjustable-rate mortgage was slightly down at 2.88% this week, a 3 basis points decline compared to data from a week earlier. At this time last year, the 5-year ARM averaged 3.06%. As for the 1-year adjustable-rate mortgage, this type of loan came out at 2.55% this week, which is 2 basis points higher compared to the prior week’s data. A year ago, the 1-year ARM was hovering near 2.42%.
Only one piece of domestic economic data got released on Thursday, which showed that initial claims for unemployment benefits fell last week to the lowest level since mid-July. The Labor Department reported earlier today, that jobless claims declined by 13,000 to 263,000 last week, which indicates an ongoing tightening in the labor market, despite a slowdown in hiring. This marks the 31st straight week that the number of applications for unemployment benefits remained below the 300,000 threshold, a number which is associated by many analysts with a healthy labor market.
Moreover, the current figure displays a more upbeat picture about the health of the labor market, following last week’s weak NFP report, which called into question whether or not the U.S. central bank will raise short-term rates before year-end.
While the Fed decided to hold off on raising rates last month, citing concerns about global economic slowdown and low inflation, San Francisco Fed President John Williams still expects the U.S. central bank to begin hiking rates this year. In a speech at the Urban Land Institute in San Francisco on Tuesday, the top Fed official said that with the employment market nears maximum level, the “next appropriate step” for the U.S. central bank is to start tightening the monetary policy later this year.
On the other hand, former Dallas Fed President Richard Fisher told CNBC on Tuesday, that the U.S. central bank shouldn’t wait until inflation reaches the Fed’s 2 percent target to increase short-term rates.
Now, the latest data from CME Group’s FedWatch indicates that the market sees a 7% chance that the Fed will raise interest rates at its October policy meeting. The odds for a rate hike in December is currently 39%. 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.
According to the Wall Street Journal’s monthly survey of economists released earlier today, 64% of respondents believe that the Fed will begin tightening its monetary policy at the December FOMC meeting. Two months ago, 82% of economists polled by the WSJ expected a rate liftoff to take place in September, while 13% of them said the central bank will wait until the December meeting with the tightening.
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