Despite historic Greek elections and a highly anticipated Fed meeting, it was a surprisingly quiet week for mortgage rates, since neither event shed much light on investors’ primary questions. As a result, mortgage rates ended the week with very little change.
Investors hoped that the two big events last week would remove some of the uncertainty that has hung over financial markets for months, but they were mostly disappointed on that front. On Wednesday, the Fed extended the duration of Operation Twist through the end of the year. This was the middle ground between adding no additional stimulus and implementing a third round of quantitative easing (QE3), and the reaction was small. In the press conference, Fed Chief Bernanke stated that the economic data has been disappointing since the last meeting and that the Fed is prepared to do more to bring down unemployment if necessary. While Bernanke described the extension to Twist as a “substantive” step, most investors viewed it as a relatively minor move, and they remain just as uncertain about whether the Fed will implement QE3.
Sunday’s, (week ago), Greek elections resulted in a victory for the conservative party which supports the European Union (EU) bailout plan, but the winning party quickly announced plans to slow the pace of reform. The consensus view is that essentially nothing has changed. The new government must attempt to gather enough support to implement austerity measures, and the other EU countries will then have to decide whether the Greeks have met the conditions to receive further aid. If the radical leftist party had won, then there may have been a very different reaction in financial markets, as the likelihood that Greece would exit the EU would have increased greatly. In short, the conservative party’s victory avoided what could have been a very negative outcome for the EU, but it does not provide any fresh solutions to the problems.
The biggest event this week may be Friday’s EU Summit. In the US, New Home Sales will be released on Monday, (today). Durable Orders and Pending Home Sales will come out on Wednesday. The final revisions to first quarter GDP will be released on Thursday. Core PCE inflation, Personal Income, and Chicago PMI Manufacturing will come out on Friday. Consumer Confidence and Consumer Sentiment will round out the schedule. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.
That’s your “OML” Mortgage market Update.
Call Pete, Cody or Drew for interest rate “Specifics” today!