Mortgage rates moved sideways on Friday, as the bond market stuck in a holding pattern, with the benchmark 10-year treasury note settling at the same yield as a day earlier. Overall, last week was a pretty slow one in terms of meaningful economic data and market-moving headlines, thus as expected, mortgage interest rates have seen very little movement. The bottom line is, that for borrowers on the fence, there’s definitely the possibility to refinance and save on monthly payments or buy a new or used home and lock in an ultra-low rate, as current mortgage rates are still hovering near the lowest levels in more than 8 months. The average lender is offering the standard 30-year fixed mortgage at 4.000%, but some of the more agressive loan providers are down to 3.875% these days.
As mentioned above, treasury yields have seen only minor changes on Friday, with the top-rated 10-year note finishing the trading session at a yield of 2.15%. A week earlier this type of treasury note, was only a slightly higher at 2.16%. The long-dated 30-year treasury note closed Friday’s trading at a yield of 2.71%, down 1 basis points compared to data from a day earlier. The yield on the 30-year note was at 2.78% a week ago.
During last week several Fed officials made public appearances, offering fresh views on future monetary policy, following the central bank’s decision to raise its benchmark lending rate for the third time in six months at the latest FOMC meeting in June. The federal funds rate is currently in the range of 1.00% – 1.25%. Overall, Fed officials offered a mixed narrative last week, with some of the central bankers being optimistic, while others rather pessimistic about the current pace of rate hikes.
One of the more hawkish policymakers of the U.S. central bank, Cleveland Fed President Loretta Mester said on Friday at an event in Cleveland, that the recent patch of soft inflation readings shouldn’t deter the central bank to continue raising rates. According to Mester, who isn’t a voter on the Fed’s policy-setting committee this year, the recent inflation downturn was likely temporary, and while there’s no „immediate need” to tighten monetary policy, the economy is strong enough for gradual rate hikes going forward.
Unlike Mester, St. Louis Fed chief James Bullard is more concerned about the recent weak inflation readings. Speaking at an event in Nashville on Friday, Bullard said that the central bank should hold off on raising rates until it’s clear inflation is reliably heading towards the Fed’s target level. “Recent inflation data have surprised to the downside and call into question the idea that U.S. inflation is reliably returning toward target,” Bullard said. According to the top policymaker, “The Fed can wait and see how the economy develops before making any further adjustments to the policy rate.”
Fed officials are expected to lift rates once more this year, according to the central bank’s latest quarterly median projections. The much-watched CME FedWatch tool, which is used by investors and traders to predict future monetary policy, is currently showing a 43.7% probability of a rate increase before the end of the year. That’s up 2.5% compared to data from Friday.
Now, this week’s U.S. calendar offers a slew of economic data, including fresh inflation figures, first quarter GDP data, durable goods report, as well as fresh readings on consumer confidence, pending home sales and jobless claims. Apart from the economic data, market watchers will be monitoring Fed Chairwoman Janet Yellen’s speech on Tuesday closely, for hints on the timing of the next rate liftoff and clues on how the central bank plans to wind down its asset holdings. Yellen is scheduled to speak about global economic issues at the British Academy’s 2017 President’s Lecture in London on Tuesday. Besides Yellen, two other central bankers are due to speak on Tuesday, including Philadelphia Fed President Patrick Harker and Minneapolis Fed chief Neel Kashkari. These Fedspeaks may offer insight into the officials’ thinking about the likelihood of further rate hikes going forward.
On the economic data front, a fresh reading on U.S. durable goods orders will kick off things this Monday. The consensus expectation is that orders for long-lasting goods likely fell 0.4% in May, following a drop of 0.8% a month earlier. When transportation orders taken out of the equation, orders estimated to have increased 0.3% last month.
This week the Conference Board will release the final reading on its consumer confidence index for June. According to the latest estimations, consumer confidence likely declined to 117.5 this month from 117.9 in May. While data from the last few months shows a decline in consumer confidence, the index still hovers near a 10-year high.
On Tuesday, a fresh housing market report will see the light of day in the form of the S&P/Case-Shiller Home Price Index. Analysts expect an increase in home prices in April, which would mark the 16th straight month of rising home prices.
The week ahead will see the release of another fresh housing market report. On Wednesday, The National Association of Realtors will publish the May Pending Home Sales report. Economists are projecting that pending home sales likely ticked up at a modest pace of 1.1% in May, following a setback in April.
Final figures on first-quarter economic growth are set to be released on Thursday. Economists forecast that the U.S. economy expanded at a 1.2% annual rate in Q1, the same as the preliminary estimates.
On Friday, The Commerce Department will release the latest Personal Income and Outlays report, as well as the Personal Consumption Expenditure (PCE) price index for May. Personal nominal income likely increased 0.3% last month, while consumer spending likely grew by a modest 0.1%, according to the most up-to-date estimations. The headline PCE inflation, which is a closley monitored indicator, as it’s the Fed’s preferred gauge of inflation, likely fell 0.08% last month. Core PCE inflation, which excludes volatile food and energy categories, likely climbed 0.02% in May.
Economic activity in the Midwest likely improved to 60 in June, following a reading of 59.4 in the prior month, according to forecasts. The latest Chicago Purchasing Management Index is set to be released on Friday.
The preliminary reading of the The University of Michigan’s Consumer Sentiment Index for June dropped to 94.5 versus the expectation of 97.1. The revised reading of June’s consumer sentiment index is coming out on Friday. If the new outlook shows some improvements compared to the preliminary reading, it could signal that Americans are more upbeat about the economy. Back in May, the index hit 97.1 for its final reading.