It's been a relatively calm first part of the week with mortgage rates holding at last Friday's levels but the 10 year Treasury has recovered a little (.05%) of the .20% increase from last Friday. The expected correction from last Friday's very sharp jump in rates hasn't materialized, re-enforcing the bearish outlook for the bond market.
What has happened since Friday?
Not much. There haven't been any economic reports of any consequence to move rates. The minutes of the June meeting of the FMOC (Federal Open Market Committee) were released at 2:00 ET today. The markets were cautious ahead of the meeting but immediately after the release, rates improved slightly and then reversed, climbing higher before starting down again. From a cursory review, there really isn't anything in the minutes that should be surprising anyone plus the meeting was 3 weeks ago. The only glaring item was the optimistic outlook on the economy coming from the staff economists. The investors are just skittish about the bond market. Late today, the bond was at 2.68%, down from Monday's high of 2.756% but up from today's low of 2.63%. To put this in perspective, the 10 year was yielding 1.61% on May 1st. That's a 1% increase in two months. In minor news out today, mortgage applications were down again this week as refinances have pretty much dried up but of more concern, purchase applications were down another 3.0%. That's a 6% drop in purchase applications in two weeks and 16% total drop. The only strong part of the economy right now is the housing market but with higher interest rates and dropping applications we may be damaging the recovery.
What to Expect?
We have four reports of consequence on Thursday and Friday. Jobless Claims will lead the way as the FOMC minutes continued to reflect that unemployment is the main obstacle to the Fed stopping the stimulus purchases of mortgages and forcing rates even higher. On all other information the next few days, news positive for rates will be completely discounted and information good for the economy (bad for rates) will be magnified. For hom buyers, lock in your interest rates now. The odds are clearly in favor of higher rates.
Have a great end of the week. We'll talk on Friday.
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