After a semi-calm start, last week ended terribly for mortgage rate shoppers highlighted (lowlighted?) by Thursday’s mortgage bond market crash.
The drubbing Thursday was the worst day for the bond market in three years and is one of the reasons why the conforming and jumbo 30-year fixed mortgage is up 0.625% since late-April.
Conforming and jumbo ARMs are up as well, although not as much.
One factor impacting the mortage bond market is central bank activity in other countries. The European Central Bank, for example, raised its benchmark interest rate by 0.25% last week. That caused investor cash to move away from the United States and into the Eurozone.
As the cash leaves the U.S. markets for markets elsewhere, it creates an excess supply which pushes prices down.
For bonds, lower prices equals higher rates.
This week, there is little news to report until Wednesday so expect momentum trading to continue until then. The week then finishes with a few reports of consequence:
- Retail Sales
- Producer Price Index
- Consumer Price Index
Markets will be watching these reports with an eye towards the Fed’s next meeting June 27-28. As of today, markets are not expecting an increase in the Fed Funds Rate, but “hot” data could change that point of view.
Regardless of data (and like we discussed last week), unless mortgage bond traders engage in profit-taking, the upward trend in rates should continue this week.