Mortgage Market Update 4/2/12

Additional comments indicating that the Fed is in no rush to tighten policy and renewed concerns about Europe helped mortgage rates improve last week. Mixed economic data and Treasury auction results had little overall impact.

After the March 13 Fed statement, mortgage rates swiftly moved higher, but they have since improved and are close to where they were prior to the announcement. Two weeks ago, Fed Chief Bernanke clarified the Fed’s current position, causing investors to scale back their reaction to the Fed statement. Last week, Fed Chief Bernanke again emphasized that the Fed is inclined to keep its very accommodative monetary policy in place to help the labor market. His comments suggested that if economic growth in coming months slows below expected levels, additional Fed purchases of mortgage-backed securities (MBS) remain a possibility. As a result, investors further shifted their outlook for Fed policy last week, helping mortgage rates improve.

Since the announcement of the Greek debt deal a few weeks ago, few headlines about Europe have been seen. Last week, however, concerns about financial conditions in Europe emerged again as a significant factor. Spain was the primary topic of conversation, as thousands of workers protested government cutbacks. To avoid a bailout, Spain must attempt to successfully implement austerity measures and still maintain a decent rate of economic growth. Weak economic growth in the euro-zone adds to the challenge.

The biggest economic report this week will be the important Employment data on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Before the employment data, ISM Manufacturing and Construction Spending will be released on Monday, (today). The detailed FOMC Minutes from the March 13 Fed meeting will be released on Tuesday. ISM Services and ADP Employment will come out on Wednesday.

Call me today for a firm rate quote.

Pete Young



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