Mortgage news from Stuart Crawford at VIP Mortgage:
Central bankers were the main influence on mortgage rates over the past week, actual economic data caused little reaction. Mortgage rates ended the week slightly lower.
In a speech last Monday, Fed Chair Janet Yellen discussed the weak job gains seen in May (which we touched on in last week’s report). Yellen warned against reading too much into one report and pointed out that other recent labor market data has been more positive. Wage gains, job openings, and unemployment claims are at levels consistent with continued improvement in the labor market. However, Yellen's speech dropped a key reference to "in coming months" which had been used in a speech just a couple of weeks earlier to describe the time frame for the next rate hike. It appears that the May Employment report caused enough concern for Fed officials that they are less confident that the next rate hike will take place soon. As a result, investor expectations for rate hikes from the Fed were pushed farther into the future, which was good for mortgage rates.
Another positive factor for U.S. mortgage rates was a new stimulus measure from the European Central Bank (ECB), a corporate bond purchase program, which began this week. This new program helped push bond yields in Europe to record low levels, which made U.S. bonds relatively more attractive to investors. This was evident in the high demand for U.S. bonds seen in last week’s Treasury auctions. The added demand for U.S. bonds helps keep yields low in the U.S., including mortgage rates.
Looking ahead, the next Fed meeting will take place this Wednesday. No change in rates is expected, but investors will be looking for hints about the timing of the next rate hike (what else is new?). Before that, the report on retail sales will be released on Tuesday. Remember this can be a key report as consumer spending accounts for 70% of economic output in the U.S.
Stuart can be reached at 480.776.2954