Volatile Week On The Market! Mortgage Rates Fluctuate. | Mortgage rates experienced many sharp movements this week. News about Greece and the Fed Minutes produced surprisingly large reactions, while the economic data had little impact. The net result was a small increase in mortgage rates.
This week’s volatility reflects the high degree of uncertainty investors face on a couple of key issues. One is the status of negotiations on a Greek aid package that is critical for its future financial stability and continued membership in the European Union (EU). Earlier in the month, a Greek exit from the EU was considered just a remote possibility, but now investors are trying to determine the significance for financial markets in case it does take place. Shifting expectations for an aid agreement are pushing investors in and out of safer assets, such as US bonds and mortgage-backed securities.
Investor expectations also range across a large spectrum for the timing of fed funds rate hikes. The Minutes from the January 28 Fed meeting released this week provided little guidance to help investors narrow down the possible time frame. Since Fed policy impacts economic growth rates and inflation expectations, it influences mortgage rates.
The latest housing data indicated that activity slowed during January likely due to unusually bad winter weather. Both Housing Starts are Building Permits declined a little, but both remain far above their levels seen one year ago. The NAHB Housing index also showed a small drop in home builder confidence.
Next week, the big economic news will be Fed Chair Yellen’s semi-annual testimony before Congress on Tuesday and Wednesday. Existing Home Sales will be released on Monday, and New Home Sales will come out on Wednesday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Thursday. CPI looks at the price change for finished goods which are sold to consumers. Pending Home Sales and revisions to fourth quarter GDP will be released on Friday. There will be Treasury auctions on Tuesday, Wednesday, and Thursday. Investors will be closely watching the Greek aid negotiations as well.
This week’s article from MBS QuoteLine.