Mortgage rates are essentially unchanged at 2015 lows.
US interest rates continue to benefit from investors who are concerned about the global economy. China’s economy is weakening and conditions in Europe are struggling to improve. As a result commodity prices are at multi-year lows and currencies for emerging markets have softened. When global uncertainty is on the rise it creates demand for US-denominated “safe” assets and reduces yields. In fact, according to Lipper, a fund tracking company, US based mutual funds focused on treasury securities are on track to draw the most inflow of capital this year since 2009.
The economic calendar is very busy this week. Earlier today we got a reading on inflation and pending home sales. The Core Personal Consumption Expenditure price index increased by only .1% last month and is up only 1.3% from last year. The Fed’s target is 2% for this index and therefore price pressure remains well below the levels they’d like to see.
According to the National Association of Realtors pending home sales fell by 1.4% last month on a year over year basis. Higher prices and tighter inventory continue to weigh on the number of transactions.
On Tuesday we’ll get the latest Case-Shiller home price index report and on Friday we get the all-important jobs report. I will focus on that report in Thursday’s update.
From a technical perspective mortgage-backed bond prices are trading at recent highs. I think borrowers have more to lose than to gain so will maintain a locking bias.
Current Outlook: locking bias