Lowest Levels of the Year
Week of April 17, 2017
A wide range of news was positive for mortgage rates this week, and it far outweighed the relatively minor unfavorable influences. As a result, mortgage rates ended the week lower, at the best levels of the year.
Investors grew more concerned about the conflicts in Syria and North Korea this week. Their response was to seek relatively safer investments, including mortgage-backed securities (MBS). Since mortgage rates are set based on MBS prices, the added demand for MBS was good for rates.
A similar reaction was seen when the latest polls in the French election showed gains for candidates who favor leaving the European Union (EU). The first round of the French election will take place on April 23, and the second round occurs a couple of weeks later. If the winner seeks a French exit from the EU, it could lead to major changes in Europe. The potential for this to happen caused investors to shift to safer assets.
Comments from President Trump also were positive for mortgage rates this week. On Wednesday, Trump said that the U.S. dollar is “getting too strong” and that he likes “a low-interest rate policy.” Since Trump appoints the Fed Chair, his support for looser monetary policy caused mortgage rates to decline.
Despite the global uncertainties around the world, recently released data showed that U.S. consumer sentiment remained at the elevated levels seen since the election. The preliminary reading for the consumer sentiment index from the University of Michigan rose to 98, above the consensus of 97, and the second highest level in years.
The Week Ahead
Looking ahead, geopolitical events could influence U.S. markets at any time. In the U.S., the NAHB housing confidence index will come out on Monday. Housing Starts and Industrial Production will be released on Tuesday. Existing Home Sales will come out on Friday.
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