U.S Treasury yields failed to spur a 6th consecutive rise in mortgage rates last week, with geo-political risk likely to provide relief in the week ahead.
U.S mortgage rates managed to avoid a 6th consecutive weekly rise, with rates easing back by just 1 basis point to 4.71% for the week ending 4th October, according to Freddie Mac’s latest report, leaving mortgage rates just shy of last week’s 7-year high.
In spite of the minor pullback in the week, economic data out of the U.S continue to support the upward trajectory for mortgage rates, with 5% rates unlikely to be far off should momentum in the U.S economy continue, the mid-term elections deliver few shocks and the U.S and China settle their differences.
Economic data released through the week ending 4th October included softer than anticipated core PCE price index figures for August together with September private sector PMI numbers and September’s ADP nonfarm employment change and weekly initial jobless claims numbers that were all skewed to the positive ahead of official government nonfarm payroll and wage growth figures that were released on Friday and will influence next week’s moves.
Outside of the data, FED Chair Powell also contributed to the upward momentum in U.S Treasury yields, with a positive outlook on the economy and hawkish chatter on policy getting a market reaction, while the positive sentiment towards NAFTA’s replacement USMCA was offset by rising tensions between the U.S and China, which has raised question on whether the continued surge in economic activity is as a result of companies looking to avoid fresh tariffs or due to actual demand, business inventory numbers in the coming months likely to tell the story.
Freddie Mac weekly average rates for new mortgages as of 4th October were quoted to be:
Mortgage Bankers’ Association Rates for the week ending 28th September were quoted to be:
Weekly figures released by the Mortgage bankers Association showed that the Market Composite Index, which is a measure of mortgage loan application volume, was unchanged in the week ending 28th September following on from the previous week’s 2.9% increase, week-on-week.
The Refinance Index decreased by 0.1%, in the week ending 28th September, following the previous week’s 3% rise, with the share of refinance mortgages remained unchanged at 39.4%.
The Mortgage Bankers Association also released its mortgage credit availability report for September:
For the week ahead, it’s a less hectic economic calendar with the Monday holiday in the U.S, key stats through the week limited to wholesale and consumer inflation figures due out on Wednesday and Thursday. A forecasted uptick in the annual rate of inflation could spur another U.S Treasury sell-off, but with geo-political risks ever present and China returning from a week off, it’s not just the stats that will provide Treasuries and mortgage rates with direction through the week.
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.