Despite another week of mostly bond market friendly news, mortgage rates only managed very slight improvement, finishing the week unchanged to .125% lower depending on the particular blend of loan type, loan size, and borrower quality.
In addition to other well publicized economic malaise, declining demand has driven energy and other prices lower, as evidenced by both the producer and consumer price indices published last week. In effect we have replaced market fears over inflation with those of deflation. A prolonged period of deflation would bode well for lower mortgage rates.
Thanksgiving festivities shorten the trading week. During short weeks, market participants scale down staffing and take a risk averse approach. Accordingly, trading volume slows to a trickle. This, as often as not, is a recipe for volatility – we just don't know which direction.
The economic calendar offers a handful of high impact reports this week. GDP (Tue), Personal Consumption Expenditures (Wed), and Durable Goods Orders(Wed) are the most likely to move the bond markets and mortgage rates. The ongoing tale of real estate market woe will print another chapter as existing and new home sales reports hit the street Monday and Wednesday respectively.
Barring a huge stock market rally, more signs of a weak and/or deflationary environment could help mortgage rates improve. We re-iterate our opening warning that things may be volatile in the holiday shortened week.
This Week's Economic Calendar [Barron's]
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