Mortgage bond prices finished the week near unchanged which kept rates steady. There was some seesaw trading but within a relatively narrow margin as the possibility of a Fed rate hike in the short term waxed and waned. Fed Governor Lael Brainard made dovish remarks which surprised traders who were prepared for a signal of a rate hike. Producer prices were unchanged versus the expected 0.1% increase. The core, which excludes volatile food and energy prices, rose 0.1% as expected. Retail sales fell 0.3% versus the expected 0.1% decrease. Consumer prices rose 0.2% slightly higher than the expected 0.1% increase. The core rose 0.3% versus the expected 0.2% increase. There was some flight to safety MBS buying Friday morning as shares of Deutsche Bank plunged 8%. Mortgage interest rates finished the week unchanged.
Economic globalization is the increasing interdependence of national economies through trade, finances, and technology. While economists debate the pros and cons of globalization, the fact remains that globalization is not new and continues to expand.
As a driving force in the global economy, the US often benefits when foreign economies struggle. Investors often move funds to safe havens in what is called a “flight to quality” in uncertain times. US debt instruments saw an influx of foreign investment over the past few years amid concerns of nations defaulting on their debt and various banking institutions struggling. Bond prices rose, which caused mortgage interest rates to fall. From a short-term perspective it was great for U.S. homebuyers and those refinancing as they took advantage of the drop in rates. However, what goes up often comes down and we have witnessed some reversal of the flight to quality buying of US debt from time to time as the Eurozone showed some signs of stability. Nobody can say with certainty how it will all play out. Stability isn’t growth and bailout money can’t last forever. As a result, we should expect continued mortgage interest rate volatility.
Now is a great time to take advantage of historically low mortgage interest rates.