Posts Tagged ‘mortgage rates outlook’

Market recap for week ending 03/21/2013

Posted on: March 22nd, 2013 by Fred Bohman No Comments

At the time I am writing this, mortgage interest rates are less than 1/8th of a percent lower than they were last Friday.

The Euro zone is back center stage in the news this week. On Monday it was announced that Cyprus has asked from more emergency funding from the European Central Bank (ECB). The ECB is requiring that Cyprus comes up with 10B Euros before providing any more funding. Since Cyprus does not have the 10B Euros they closed all banks and proposed a plan where they would raid all bank accounts at a certain percentage of the total account balance. Obviously the people of Cyprus did not like this strategy very much and started rioting. The banks are still closed but no accounts have been raided as of yet. Yesterday the ECB officials told Cyprus that they have till Monday to raise the money or the deal is off.

The crisis in Cyprus caused a big flight to safety rally on Monday. When investors get nervous about uneasy situations they tend to move their money into safe investments like US bonds. When money flows into bonds mortgage rates drop. On Tuesday and Wednesday we saw rates come back up a little but then we saw another drop on Thursday. The key thing to keep an eye out for is if the crisis will spread past Cyprus or be contained there. If the crisis starts spreading past Cyprus or worsens there then rates should drop further. On the flip side if the crisis is resolved looks for rates to go back up.

Market recap for week ending 03/15/2013

Posted on: March 15th, 2013 by Fred Bohman No Comments

At the time I am writing this, mortgage interest rates are less than 1/8th of a percent lower than they were last Friday.

More positive economic news this week, putting upward pressure on interest rates. On Wednesday the February retail sales report was released and it came in better than expected. The fact that consumers are spending money shows that the economy is getting back on track. On Thursday the unemployment claims figure was released and it also came in better than expected. The 4 month average of claims hit a 5 year low. We also saw some positive numbers out of Europe. The European economy is still shrinking but it looks like they will be on the road to recovery as early as next year.

Once again as the economy is showing signs of recovering it gives the Federal Reserve (Fed) less reason to keep rates low. Fed President Ben Bernanke has stated that they will continue to deflate interest rates through their quantitative easing program as long as unemployment is high. The reports coming out the last two week is showing that unemployment numbers are improving. I don’t think the Fed will end their QE program any time soon, but it might be sooner than what was previously expected.

Today we did see some negative economic reports which temporarily reversed the upward trend on rates. Dips like today’s should be used to lock in rates. Look for interest rates to slowly increase as the economy continues to improve. There will be dips along the way since the market never moves in straight line, but the long term outlook for rates is not good.

Market recap for week ending 03/8/2013

Posted on: March 8th, 2013 by Fred Bohman No Comments

At the time I am writing this, mortgage interest rates are almost 1/4th of a percent higher than they were last Friday.

On Tuesday the Dow Jones Industrial stock index broke through its all-time high set back in 2007.This is bad news for interest rates, because it shows investors are confident in our economic recovery. With our economy getting back on track there is less of a reason for the Federal Reserve(Fed )to keep interest rates low. The only reason we did not see rates go higher this week is because Fed is still deflating rates though their quantitative easing program. The stock market is till overbought and should be do for selloff and when that happens we should see a drop in rate, but it will only be temporarily. Look for rates to continue to slowly climb as our economy slowly recovers.

Market recap for week ending 03/1/2013

Posted on: March 1st, 2013 by Fred Bohman No Comments

At the time I am writing this, mortgage interest rates are almost 1/8th lower than they were last Friday.

This week mortgage bonds broken out of the tight range they have been trading in. On Monday we saw a sharp selloff in the stock market which drove mortgage rates down. This sell off was sparked by negative news out of Europe. The main piece of news was that the Italian elections were a mess. The outcome of the election was that the power was split between two parties with different ideas on how to deal with the financial crisis. With Italy being one of the countries that are at default risk, investors saw political uncertainty as a big negative.

After the big sell off on Monday the stock market recovered it losses the following days and on Wednesday it closed just 89 points shy of its all-time high set back in 2007. So far it has not been able to break that all time high, but the fact that we are this close to it shows that investors are confident in the economic recovery. On Tuesday and Wednesday the Federal Reserve (FED) president Ben Bernanke did his semiannual testimony in Washington. At the testimony he reassured that the Fed will continue to keep interest rates low for as long as needed and that they will give clear signals ahead of changing this policy.

Looking forward the US government will run out of money on March 27th unless the debt ceiling is raised again. As usual our two parties in Washington don’t agree on how to solve this problem.

Market recap for week ending 02/22/2013

Posted on: February 22nd, 2013 by Fred Bohman No Comments

At the time I am writing this, mortgage interest rates are less than 1/8th lower than they were last Friday.

Both the 10 year Treasury bond and mortgage bonds continue to be contained in a narrow range. With the Federal Reserve(FED) still committed to buying large quantities of bonds through their quantitative easing program rates have not been able to increase much. On the flip side the string of positive economic news we have seen lately has kept rates from dropping.

Earlier today St Louis Fed President Bullard was on CNBC telling investors not to worry, and that the FED is not stopping their quantitative easing program (QE) any time soon. His comments were in response to the release of the January FED meeting minutes which showed discussion on how to wind down QE when the time comes. Any time there is discussion of slowing or stopping QE investors tend to get nervous, but after Bullard’s comments market volatility died down.

The $85B of mandatory spending cuts is coming up on next Friday and we have not heard much from either side in Washington on how to deal with it. Surprisingly the market does not seem too concerned with it, either because investors believe it will be avoided last minute or that the impact of the spending cuts will not have a large negative impact on the economy. I would expect to see increase volatility next week as we lead up to the dead line. I believe the only way we will see a drop in rates at this point is if we see a large correction in the stock market which is currently overbought.

Market recap for week ending 02/15/2013

Posted on: February 15th, 2013 by Fred Bohman No Comments

At the time I am writing this, mortgage interest rates are less than 1/8th higher than they were last Friday.

Both the 10 year Treasury bond and mortgage bonds have been contained in a narrow range for the last few weeks. Technically the mortgage bonds are over sold and the stock market over bought and should be due for a correction, but so far any movement that way have not been able to keep any momentum. If we do see a correction we should see a small dip in rates, but don’t look for it to be long lived as the general trend continues to be rates going higher. The reason that rates are on the increase is that we are seeing more and more positive economic reports coming out.

Today the Empire State Manufacturing index was released and had the largest gain in 30 years. It showed that manufacturing is recovering which is a sign that our economy is getting back on track. The mandatory spending cuts are due to set in on Match 1st which is approaching quickly and as usual Democrats and Republicans can’t agree on how to deal with it. Democrats want a 10 month extension on them in exchange for some smaller spending cuts and a tax hike. As usual Republicans are opposed to any tax hikes, so we currently appear to be in a gridlock. Surprisingly the market seems to be digesting it well and there is not much volatility. If our leaders can’t come to an agreement as we get closer to the March 1st deadline look for market volatility to pick up.

Market recap for week ending 02/08/2013

Posted on: February 8th, 2013 by Fred Bohman No Comments

At the time I am writing this, mortgage interest rates are less than 1/8th higher than they were last Friday.

This week was a quite week in terms of economic reports and news out of Washington and Europe. With not much to move markets they stay relatively calm all week. The December trade deficit report came out today and was better than expected by 10 billion dollars, but it did not have much of an effect on the markets.

Looking ahead this month the focus will be on the sequester spending cuts set to kick in March 1st. They are $85B in mandatory spending cuts set up by President Obama in 2011. The point of the spending cuts is to offset the increase in the debt ceiling. As usual our two parties can’t agree on how to handle this and as we get closer to the deadline look for increased market volatility.

Market recap for week ending 02/01/2013

Posted on: February 1st, 2013 by Fred Bohman No Comments

At the time I am writing this, mortgage interest rates are less than 1/8th lower than they were last Friday.

Most of the week interest rates were on the climb mainly due to stronger than expected economic reports. Data is starting to show that US economy is recovering and that will always be bad news for rates. The reason this is bad news for rates is that low rats is seen as a toll to stimulate the economy and make it grow. When the economy is showing sign of growing there is less need for low rates to stimulate it.

Today there was a reversal in trends and the mortgage rates took back what they lost during the week and then some. The reason for this reversal was due to the unemployment report that came out today. Even though the job numbers were strong the unemployment rate was higher than expected at 7.9%. Also January payroll came in about 10% under estimates. Employment figures are considered a strong indicator on how the economy is doing, so it tends to have a big impact on rates. With the economy not doing as well as expected this signaled to investors that more stimulus might be needed and rates fell.

Market recap for week ending 01/25/2013

Posted on: January 25th, 2013 by Fred Bohman No Comments

the time I am writing this mortgage interest rates are almost unchanged from last Friday, although we might see a re-price for the worse this afternoon.

Yesterday afternoon and this morning we saw a big sell off in the mortgage bond market. The main fuel behind this sell off was optimism in Europe. Part of the reason rates have been so low lately is that Europe has been struggling with their debt problem. Fears that some countries in Europe might default on their debt has caused investors to pursue safer US investments such as mortgage bonds. Today it was announced that 278 European financial institutions will return 137.2B euros for early repayment of their emergency loans from the EU. Economist had predicted that only 84B euros would be paid back early. The fact that the European banks are able to pay back the money they borrowed early is a sign that the debt crisis is moving in the right direction, but many economists are warning that is far from over.

Next week the Federal Reserve Board (FED) will meet to discuss Fiscal policy. Investors will be monitoring meetings closely as last month’s meeting minutes shocked the market as they indicated the FED had discussed stopping quantitative easing (QE). QE is the practice of buying mortgage bonds and treasuries to artificially deflate interest rates. I don’t believe we will see QE come to an end any time soon, but at some point it will have to and any discussion of it by the FED tends to spook investors.

Market recap for week ending 01/18/2013

Posted on: January 18th, 2013 by Fred Bohman No Comments

At the time I am writing this mortgage interest rates are almost unchanged from last Friday.

During the early part of the week rates were slowly drifting lower, but yesterday they went back up. The reason for the spike yesterday was a better than expected unemployment claims report. As mentioned above even though we had a spike yesterday rates are back to where they were last week.

I don’t see rates going up much further in short term until our leaders in Washington have resolved the debt ceiling problem. On the flip side I don’t see rates going any lower with the recent good economic reports coming. Expect mortgage rates to stay in a narrow range for next few weeks.

News out of Europe has not had any large impact on our markets as investors have been focused on our domestic problems with the Fiscal Cliff and debt ceiling.