Weekly Wrap - Your Mortgage Market Update
August 25-29, 2014
Farewell summertime! While this weekend's Labor Day holiday marks 
the unofficial end of summer, it seems traders in the marketplace took an early vacation, if this week's market movements have been any indication. It was a good summer for mortgage rates, as we saw the highs from earlier in the year diminish and rates settle at an annual low. If my Monday Forecast from earlier this week was any indicator, I was pretty uncertain of how potential market movers might play out. Well, this week came in like a lamb...and went out like a lamb.
Monday was nothing much to write home about. Mortgage bonds started slighly up early (mortgage bonds up = rates heading down), went down intraday, and finished barely up. July's home sales report missed expectations, but wasn't enough of a surprise to shake up the marketplace at all.
Tuesday was a strange day. The Durable Orders report was better than anticipated, as was the Consumer Confidence index. Treasury auction results were just average, and the market barely moved at all. Normally, good economic news is bad for interest rates, but Tuesday's news did nothing as mortgage bonds opened slightly up and finished unchanged.
We didn't expect much from Wednesday in terms of market movement, as the week's biggest economic reports were due Thursday, but Wednesday proved to be one of the biggest days for movement of the week - in a week where not much happened, though, it was a pretty tame day. Rates improved ever so slightly again, continuing the trend set Monday & Tuesday.
Thursday brought about more economic news that should have been harmful to interest rates, but again, the positive trend in the mortgage bond markets continued, albeit slightly. GDP revision for Q2 were positive, treasury auction results were again average, pending home sales increased 3+% from June, and yet the market reaction was "is the long weekend here yet??". Again, bonds improved, but not enough to get excited about.
Friday was the day that had me nervous. Jobs and inflation have been big time market movers, and with inflation recently trending slightly upward, I feared recent gains in the mortgage market could be offset with a high inflation reading. Inflation simply matched what was expected, so no shake up came about, and bonds bounced around slightly, but ended up slightly to end just like every other day of the week. On aggregate, the week was a nice week for mortgage bonds and the only time in recent memory when volatility didn't come into play. It's nice to see interest rates actually trend down, rather than fall drastically in a day only to bounce up. Trends are much nicer to follow than reactions.
It appears traders were looking forward to a long weekend, and likely didn't take gains to keep their portfolios in tact at monthly minimum volume requirements. A strong week of domestic economic news was shrugged off, which indicates a lot of attention is being paid to what's going on overseas - on both the geopolitical fronts with multiple Middle Eastern conflicts as well as the Russia-Ukraine situation, and the economic front of Europe, where there has been much talk of anticipated economic stimulus which could affect our marketplace. Hopefully, this week is an indication that rates will continue to fall, but much of the direction will depend on what goes on overseas, and the only thing certain about many of those situations is uncertainty for the time being.
To see what's in store for the market next week, check out my Monday forecast blog which will lay out the possible market movers for the week of September 1-5. If you have questions on the mortgage market, products, rates, or anything else housing or finance related, get an immediate response by asking an expert.
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