Rate Watch
Last week, the Fed minutes revealed FOMC member concerns about inflation which eventually led to higher Freddie Mac weekly survey averages. The benchmark 30-year fixed rate mortgage (FRM) rose to 6.67 percent, up 5 basis points from the previous week. Other products followed. The average for the 15-year FRM came in at 6.26 percent, up from the previous week's average of 6.23 percent and one-year Treasury-indexed ARMs averaged 5.68 percent, up from the previous week when it averaged 5.61 percent.
If the above was all I told you about last week's activity, you would think that the trend of rising mortgage rates was continuing. However, the Employment Report, always the most important economic data of the month, produced a rally on Friday that should prove to bring mortgage rates back down. If you know any thing about the bond market, it can sometimes thrive on economic misfortune and this instance is one of those times. Against forecasts of 170K, the Non-farm Payrolls report revealed that only 75K new jobs were added in May, and the totals from prior months were revised lower by 37K. Average Hourly Earnings also fell short and only rose at a 3.7% annual rate. Slower economic growth, fewer new jobs, and less inflationary pressure from rising wages, and you’ve got some happy little bond investors. As a result, 10-year Treasury yields fell to 4.99% from 5.04%.
This week the economic calendar will be pretty light. Today, Fed Chairman Ben Bernanke will speak at a conference and the ISM data will be released. On Thursday, the 10-year Treasury auction will go down and foreign participation in that auction will be the main item of interest. And the International Trade figures will be release on Friday; however it will probably have little impact on the mortgage markets.
Despite the lack of any big releases this week, it is not safe to assume that rates will stay pat. The markets will look more closely at geo-political developments, like Iran, which could serve to boost rates. So even though we might get a little relief early in the week courtesy of Friday’s Employment report, I would still suggest that borrowers lock their rates as soon as possible.
posted by Vincent Biondillo @ 8:47 AM
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