Feds Continue to Prime The Pump With Accomodative Economic Policy
Over the past week, investors continued to seek the safety of U.S. bonds in the wake of the British vote to exit the European Union. This added demand offset stronger than expected U.S. economic data, and mortgage rates ended the week at the best levels in years.
In other signs of strength, the unemployment rate in June increased from 4.7% to 4.9%. In this case, this is considered a good thing due to the large increase in the number of people who felt the confidence to begin looking for a job in June. Many had not yet found employment, so they were counted in the workforce as unemployed. Average hourly earnings, an indicator of wage growth, were 2.6% higher than a year ago, which was the fastest annual rate of increase since July 2009.
Due to its effect on expectations for future inflation, stronger than expected employment data generally is viewed as bad for mortgage rates. After the release of the data on Friday, however, the expected reaction was not seen. One reason is that Brexit related demand from global investors for safer assets remains high. Added demand for government guaranteed U.S. bonds, including mortgage-backed securities (MBS), has helped push mortgage rates near record lows.
Looking ahead, next week's major economic data all will be released on Friday. The packed day will include reports on retail sales, CPI, industrial production, and consumer sentiment. Consumer spending accounts for about 70% of economic output in the U.S., and the retail sales data is a key indicator. The Consumer Price Index (CPI) is a widely followed monthly inflation report which looks at the price change for goods and services which are sold to consumers. In addition, there will be Treasury auctions on Monday, Tuesday, and Wednesday.
All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.