Mortgage bond prices finished the week higher which pushed rates lower. Global economic weakness dominated trading. Concerns in Europe resulted in additional flight to quality buying of U.S. debt instruments such as mortgage-backed securities. Sweden's central bank dropped their key rate to negative 0.50 percent from negative 0.35 percent. The data was mixed which did little to ease economic uncertainties. Weekly jobless claims were 269K versus the expected 281K. Retail sales rose 0.2% versus the expected 0.1% increase. Consumer sentiment was a weaker than expected 90.7. Stocks struggled early as oil prices fell and gold prices surged higher. However, stocks recovered a bit the end of the week. Mortgage interest rates finished the week better by approximately 1/4 to 3/8 of a discount point. Yellen Federal Reserve Chair Yellen testified before Congress last week on the state of the economy. The fact that she failed to back off the possibility of additional rate hikes left the financial markets in limbo. The Fed raised rates in December and indicated future rate hikes were on the way. Yellen stated this week that the Fed is not on a "set path" but she expects a gradual increase in U.S. rates. The Fed is in a corner and additional market volatility is likely this year amid so much uncertainty. Global economic weakness dominated trading since the Fed rate hike. Mortgage bonds rose which pushed rates lower with an influx of foreign investor funds searching for a safe return. Signs of economic recovery in the United States also remained mixed. The next Fed meeting is in March. Most analysts expect them to leave rates alone but we all know how quickly things can change. Just last summer Fed officials primed the markets for a Fed rate hike in September. That was eventually delayed until December and even then was debated. With the state of financial markets across the globe many analysts second guessed that Fed move especially while many key central banks continued to cut rates. The great news is that mortgage interest rates are historically very favorable right now. These rates are a given while even the Fed remains uncertain about the future.
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