Monday Market Commentary: Mortgage Rates Officially in a Downtrend?

by Alex Stenback on June 6, 2011

Last Week:
30 year fixed mortgage rates continued their volatile path downward as an onslaught of economic data showed USA Inc. is not posting the robust, self-sustaining, job creating numbers that were widely expected to materialize by now.

Six-months of promised but not delivered economic recovery is a recipe that almost always produces lower rates.

The culprits last week were an uptick in the unemployment rate to 9.1%, lackluster manufacturing numbers, and outright horrible job creation with only 54K jobs created in May, which inspired a sell-off in stocks, shifting money into bonds and other safe-haven assets, driving rates lower in the process.

This Week:
While rates are still in a downtrend that started in early April, it should not come as a surprise of we see a setback or two as markets re-position themselves after what has been a pretty dramatic move lower. 

In other words – expect more volatility in the coming weeks, but know that rates still have some room to improve in the medium to longer term.

As for the economic calendar this week, The Fed’s beige book (Wed) will give us anecdotal snapshots of business conditions in various Fed districts – probably the most important data this week. Weekly Jobless claims (Thurs,) and Balance of Trade report (Also Thurs) round out a thin calendar.

Also note this week’s backdrop: There’s $66 billion dollars of new Treasury inventory (bonds and notes)  for the bond markets to absorb, which can act as a headwind for further rate improvements, and the mortgage bond market movements should stay closely levered to stocks given the “light” week for hard economic reports.

Bottom line this Week: Expect volatility. Anything confirming a stalled or deteriorating economy should help rates, while positive developments could hurt.
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Watching mortgage rates?  Follow me on Twitter for frequent daily updates as events and news that drive interest rates and the housing market unfold.

{ 1 comment… read it below or add one }

John Murphy June 15, 2011 at 7:57 am

Great update Alex. I appreciate your insight on the mortgage trends.

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