Mortgage Rates Balanced After Last Week's Decrease

Mortgage rates are more balanced today after a week of steady declines and mild volatility last week.  The markets were closed last Friday for Easter and Passover - although closed there were three data released that morning.  The March CPI did not come in as expected.  A special negative in the March report is communications which fell a very steep 3.5% and reflects cell phone plans which subtracted 1 tenth from both the headline rate and core. Yet other categories are also weak including apparel and transportation where prices, due to weakness for vehicles. March retail sales also weaker than forecasts, along with February business inventories, which came in as forecasted.

The biggest concern this week comes about on what is going on overseas as well as political issues here in the States. This week will be dominated by the first round of the French presidential election on Sunday. With the number of undecided voters remaining high, four candidates look set to fight for the two places in the second round on May 7th. The polling data leading up to Sunday will have a large impact on mortgage rates. China, North Korea, Russia, Syria, Iran, and Afghanistan will continue to drive fear in the bond market.

The "data dependent" Fed continues to tell the market that we should expect two more hikes this year and be prepared for few Treasury and MBS purchases by year end. But the markets are not listening as they currently barely even have one more rate hikes priced in. We will see several speakers this week, each with their own agenda and rhetoric.

Data this quarter has not been good.  Almost with each key report that the Atlanta Fed GDPNow uses to calculate GDP has been weaker than thought. The latest calculation released last Friday dropped again to +0.5% from +0.6% on the 7th of April. Declines in worker productivity is seen as the cause, but regardless of the reason(s) the economy is not growing, and will not grow at the levels the Trump rally has been expected (3.5% to 4.0% growth).  Right now, I see little reason to expect 2017 growth much better than 2.5% and that is the consensus of an optimistic outlook.

Our economic calendar is very light this week without a single report that has the gravitas to significantly move mortgage rates. As I mentioned above, we do get a large dose of Housing news with Home Builder's Sentiment, Housing Starts and Building Permits, Weekly Mortgage Applications and Existing Home Sales.

Overall, there is not any domestic economic news due out this week that will likely move mortgage rates. The mortgage rate market will focus on geopolitical events.  The more unstable the situations seem to be overseas, the more likely mortgage rates will continue to remain low and potential move lower.