Mortgage markets / rates improved last week on employment data and international banking concerns. The news triggered buying in the bond market and, as a result, conventional, FHA and VA mortgage rates in South Carolina improved for the 4th consecutive week.
Mortgage rates are now at a 6-week low, but probably shouldn’t be. It underscores just how important global events can be to U.S. mortgage markets.
For example, corporate earnings continue to improve and key elements of the economy are strengthening. Even the Fed acknowledges this. In most circumstances, this would be a boon for the stock markets and bond markets would suffer, including mortgage bonds.
Last week, that wasn’t the case.
Early in the week, as (1) China tightened its monetary policy, (2) Greece did little to quell default fears, and (3) Spain raised its deficit forecasts, global investors sought to reduce their collective risk exposure. For safety of principal, many sold some of their more aggressive positions and moved the cash proceeds into the U.S. bond market, which includes mortgage bonds.
On Wall Street, this type of trading pattern is called a “flight-to-quality”. Because mortgage bonds are backed by U.S. government entities, the debt is considered to be ultra-safe. Last week’s extra demand for bonds helped to push prices up and mortgage rates down.
And that was before Friday’s weak jobs report. Although the Unemployment Rate fell to 9.7%, the government reported a net loss of 98,000 jobs last month and this, too, helped mortgage rates tick lower.
This week, we’ll hope for more of the same
There’s very little news to move rates this week, so keep an eye on the global market for similar stories like last week. Or, if you’re not sure what to look for, just give me a call or send me an email and I’ll be happy to watch the markets and mortgage rates for you.
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