Mortgage rates improved gently last week, and are now firmly affixed below 5% for the first time since May. A series of weak or unremarkable economic reports, along with the growing realization that real economic recovery seems elusively distant, was enough to inspire a positive trade in the mortgage market for most of the week.
To Recap: The Chicago PMI was “surpisingly” weak, suggesting that broad economic activity has not started to rebound. A weak employment report (263K jobs lost, 15 million people unemployed), mixed but non-threatening inflation data from the PCE, improving but still ho-hum numbers from housing, and some high-profile public hand-wringing over the employment situation, and you have a recipe for stable to lower rates.
Which is what we got.
The economic calendar this week is punctuated by mostly second tier reports. So rather than economic reports, expect stocks, and supply in the bond markets to be the primary drivers of mortgage rates this week.
There’s something like 70 Billion in 3 year notes, 10 year notes, and 30 year bonds coming to the bond market on Tuesday, Wednesday and Thursday. Initial indications are these offerings will be well-bid (a good thing for mortgage rates.) Stocks have been on an extended run recently, but the Dow gave back 177 points last week, and seem to lack a reason to go higher from here.
These two market’s behavior this week should provide a decent verdict on where “they” (Stocks and bonds, respectively) think the economy is in terms of recovery. If the Bond market laps up this supply and starts looking for more, or if stocks continue last week’s sell-off in earnest, mortgage rates should continue to benefit.