According to the calendar summer has passed. From a meteorological perspective autumn began on September 1st in the Northern Hemisphere. However, judging from the temperatures outside it feels like summer remains here in Portland.
What also remains are low interest rates. Mortgage rates improved modestly last week and are firmly at 2017 lows.
As I wrote about last Monday (HERE) the US 10-year treasury note has successfully closed below the important technical level of 2.18% (currently at 2.08%). The last time interest rates were this attractive was during the days following the election in November 2016.
Last week two economic reports in particular helped mortgage rates improve. First, lower than expected inflation data from the Commerce Department called into question the Fed’s plans for continued tightening. According to CME Group there is only a 36% probability that the Fed will hike short-term interest rates again this year. Previously the probability had been greater than 50%.
Second, Friday’s all-important jobs report showed weaker than expected job creation for the month of August. Bad news for the economy is often good news for mortgage rates.
Also contributing to low interest rates is a “flight to safety” in the financial markets. Investors are reacting to news out of North Korea that a nuclear firearm was successfully tested over the weekend and that further tests are planned for the coming days. Anytime geopolitical tension rises interest rates tend to improve.
This week’s economic calendar is relatively light. I expect sentiment regarding the North Korean missile situation will drive action in the financial markets. If tension wanes we could see interest rates worsen and vice versa.
Current Outlook: floating