Although the Nasdaq Composite Index set a new all-time high last Wednesday, the three major stock indexes finished the week lower amid escalating trade tensions primarily between the U.S. and China and the U.S. and the European Union.  The Trump Administration wants to level the playing field when it comes to trade and tariffs by negotiating better deals to protect American workers and the economy.  U.S. tariffs are among the lowest in the world and in our nation’s history.  U.S. trade policy has long favored lower tariffs and fewer restrictions on the movement of goods and services across international borders while our trading partners have been more restrictive.  The U.S. is currently running the following trade deficits:

 

China – $636 billion traded with a $375 billion deficit.

Mexico – $557 billion traded with a $71 billion deficit.

Japan – $204 billion traded with a $69 billion deficit.

Germany – $171 billion traded with a $65 billion deficit.

Canada – $582 billion traded with an $18 billion deficit.

 

In response to all of the tariff and trade war talk, longer-term bond yields slipped marginally lower resulting in relatively stable mortgage rates.

 

There were several housing-related reports released this past week.  Last Monday, the National Association of Home Builders/Wells Fargo Housing Market Index (NAHB) measuring home builder sentiment was reported to have slipped two points to 68 in June.  A reading above 50 is considered to indicate positive sentiment.

 

Yet, June’s decline was attributed to soaring lumber prices that have added almost $9,000 to the average price of a new single-family home since January 2017.  Robert Dietz, NAHB chief economist, commented “Improved economic growth, continued job creation and solid housing demand should spur additional single-family construction in the months ahead.  However, builders do need access to lumber and other construction materials at reasonable costs in order to provide homes at competitive price points, particularly for the entry-level market where inventory is most needed.”

 

 

Tuesday, the U.S. Census Bureau and the Department of Housing and Urban Development reported Housing Starts increased 5.0% month-over-month in May to a seasonally adjusted annual rate of 1.350 million, exceeding the consensus forecast of 1.323 million.  However, Building Permits declined 4.6% to 1.301 million falling below the consensus estimate of 1.343 million.  Permits are a leading indicator of housing market strength and were lower in May for both single-family units (-2.2%) and multi-unit dwellings (-8.8%).  This suggests we may see some weakness in the June Housing Starts report.

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Wednesday, the National Association of Realtors reported sales of Existing Homes declined 0.4% month-over-month in May to a seasonally adjusted annual rate of 5.43 million.  This was slightly below the consensus forecast of 5.55 million.  The median existing home price for all housing types jumped 4.9% to an all-time high of $264,800 – the 75th straight month of year-over-year gains.  Existing home inventory for sale at the end of May rose 2.8% to 1.85 million, but this is 6.1% lower than the same period a year ago.  Unsold inventory is currently at a 4.1-month supply at the current sales rate compared to a usual 6.0-month supply associated with a more balanced market.  The song remains the same…limited home inventory coupled with rising prices and mortgage rates is hampering affordability, especially for first-time home buyers.

 

Wednesday, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed an increase in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 5.1% during the week ended June 15, 2018.  The seasonally adjusted Purchase Index increased 4.0% from the week prior while the Refinance Index increased by 6.0% from a week earlier.

 

Overall, the refinance portion of mortgage activity increased to 36.8% from 35.6% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 7.0% from 6.8% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance remained unchanged at 4.83% with points decreasing to 0.48 from 0.53.

 

For the week, the FNMA 4.0% coupon bond gained 9.3 basis points to close at $101.734 while the 10-year Treasury yield decreased 2.36 basis points to end at 2.9004%.  The Dow Jones Industrial Average lost 509.59 points to close at 24,580.89.  The NASDAQ Composite Index fell 53.56 points to close at 7,692.82.  The S&P 500 Index dropped 24.78 points to close at 2,754.88.  Year to date on a total return basis, the Dow Jones Industrial Average has lost 0.56%, the NASDAQ Composite Index has gained 11.44%, and the S&P 500 Index has advanced 3.04%.

 

This past week, the national average 30-year mortgage rate increased to 4.70% from 4.65%; the 15-year mortgage rate rose to 4.15% from 4.11%; the 5/1 ARM mortgage rate increased to 3.99% from 3.95% while the FHA 30-year rate rose to 4.42% from 4.38%.  Jumbo 30-year rates increased to 4.73% from 4.68%.

 

Economic Calendar – for the Week of June 25, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

 

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Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.734, +9.3 bp) traded within a far narrower 28.1 basis point range between a weekly intraday high of 101.859 on Tuesday and a weekly intraday low of $101.578 on Thursday before closing the week at $101.734 on Friday.

 

The bond traded along a convergence between the 25-day and 50-day moving averages (MAs).  These MAs act as both short-term support and resistance.  Should the 25-day MA cross above the 50-day MA, it would signal market strength and a buy signal likely resulting in a slight improvement in mortgage rates.  However, technical resistance is also found at the 76.4% Fibonacci retracement level at $101.988 so any upward move will have to contend with this layer of resistance plus that from the 100-day MA at $102.087.  These levels may temper any upward move resulting in stable rates.

 

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In addition to some generally positive economic news, there were three major events affecting the financial markets this past week.  There was an historic initial summit between the U.S. and North Korea over denuclearizing the Korean peninsula; a 25 basis point rate hike by the Fed; and further threats of a trade war between China and the U.S.  The three major stock indexes ended “mixed” for the week after the Dow Jones Industrials slid lower on Friday erasing its weekly gains.  The Nasdaq Composite Index managed to set a new record high during the week before falling back on Friday while the S&P 500 ended minimally higher.

 

The stock and bond markets reacted somewhat negatively to the Federal Reserve’s monetary policy meeting on Wednesday.  Fed officials decided to raise the federal funds rate by another 0.25% as widely expected, but the markets retreated after policymakers provided a more hawkish view for future rate hikes with greater expectations for a total of four rate hikes in 2018, rather than three.

 

Tuesday, the Labor Department reported consumer inflation in May rose 0.2% and had reached 2.8% on a year-over-year basis, its highest level since 2011.  However, most of the increase in inflation is attributed to the rise in oil prices, and core inflation (excluding food and energy costs) remained close to the Fed’s target of 2%.  Thursday, Retail Sales provided an upside surprise with retail sales excluding automobiles increasing 0.9% in May versus expectations for a 0.5% gain.  Friday, the Trump administration declared it would follow through with an earlier warning to implement tariffs on imports of $50 billion worth of goods from China in response to intellectual property theft and forced technology transfers.  China quickly responded with proposed tariffs on

$50 billion worth of U.S. goods including beef, cars, poultry, and tobacco.  Hopefully, these tariff announcements are nothing more than strategizing for a negotiated solution that will avoid a full-blown trade war that would end with negative consequences for the world’s two largest economies.

 

There were two mortgage-related reports released this past week.  Tuesday, CoreLogic released its monthly Loan Performance Insights Report for March 2018.  The report showed the number of mortgage loans 30 days or more past due declined from 4.8% to 4.3%.  The serious delinquency rate, defined as those loans 90 days or more past due, dropped to 1.9% in March, the lowest delinquency rate for the month of March since 2007 when it was 1.5%.  The serious delinquency rate a year ago for March was 2.1%.

 

The foreclosure inventory rate, a measure of the share of mortgages in some stage of the foreclosure process, was 0.6% for March – a level that has been holding since August 2017 and the lowest level since June 2007.  Dr. Frank Nothaft, chief economist for CoreLogic, remarked

“Unemployment and lack of home equity are two factors that can lead to borrowers defaulting on their mortgages.  Unemployment is at the lowest level in 18 years, and for the first quarter, the CoreLogic Equity Report revealed record levels of home equity growth with equity per owner up $16,300 on average for the year ending March 2018.”  This is certainly good news for the housing industry.

 

 

Wednesday, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed a decrease in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 1.5% during the week ended June 8, 2018.  The seasonally adjusted Purchase Index declined 2.0% from the week prior while the Refinance Index also decreased by 2.0% from a week earlier.

 

Overall, the refinance portion of mortgage activity remained unchanged at 35.6% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 6.8% from 7.1% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.83% from 4.75% with points increasing to 0.53 from 0.46.

 

For the week, the FNMA 4.0% coupon bond gained 4.7 basis points to close at $101.641 while the 10-year Treasury yield decreased 2.6 basis points to end at 2.924%.  The Dow Jones Industrial Average lost 226.05 points to close at 25,090.48.  The NASDAQ Composite Index gained 100.87 points to close at 7,746.38.  The S&P 500 Index added 0.63 of one point to close at 2,779.66.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 1.50%, the NASDAQ Composite Index has added 12.21%, and the S&P 500 Index has advanced 3.96%.

 

This past week, the national average 30-year mortgage rate decreased to 4.65% from 4.68%; the 15-year mortgage rate was unchanged at 4.11%; the 5/1 ARM mortgage rate increased to 3.95% from 3.94% while the FHA 30-year rate fell to 4.38% from 4.42%.  Jumbo 30-year rates decreased to 4.68% from 4.70%.

 

Economic Calendar – for the Week of June 18, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.641, +4.7 bp) traded within a wider 53.1 basis point range between a weekly intraday high of 101.797 on Friday and a weekly intraday low of $101.266 on Wednesday before closing the week at $101.641 on Friday.

 

The bond fell to its secondary support level at $101.234 during the first half of the week before bouncing and moving higher just above primary short-term support at $101.586 by the end of the week.  There was a new buy signal on Thursday from a slow stochastic crossover plus the bond is neither overbought nor oversold so we should see prices rise into overhead resistance levels this coming week.  If the bond is able to break above overhead resistance, it should lead to stable to slightly lower mortgage rates in the coming week.

 

 

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The major stock market indexes made a solid advance during the week amid strong jobs and economic data resulting in lower bond prices and rising yields.  Tuesday, the ISM Non-manufacturing Index showed a greater than forecast expansion in the services sector with a reading of 58.6 in May from 56.8 in April.  This increase matched the rise in the ISM Manufacturing Index for May, suggesting second quarter GDP growth will show a noticeable increase over GDP growth in the first quarter.

 

Also on Tuesday, the monthly Job Openings and Labor Turnover Survey (JOLTS) showed there were 6.698 million job openings available in April with only 6.4 million available workers to fill them.  This is the second month in a row where there were more job vacancies than available hires, a phenomenon the American economy has never experienced before until March and April of this year.  Although this situation should create a demand for higher wages, average hourly earnings only increased 2.7% annualized in May, up one-tenth of a point from April.  However, you can bet the Fed will be keeping a close eye on wage growth going forward, and there is no doubt that they will raise interest rates for the second time this year when they announce their rate-hike decision this Wednesday.

 

There was one housing related report released this past week.  Tuesday, CoreLogic reported their latest Home Price Index (HPI) and Forecast for April 2018 showing home prices increased by 1.2% month-over-month in April and by 6.9% year-over-year from April 2017.

 

CoreLogic is forecasting their national HPI will continue to increase 5.3% on a year-over-year basis from April 2018 to April 2019 and will rise another 0.2% for May 2018.  Frank Nothaft, CoreLogic Chief Economist, remarked “The best antidote for rising home prices is additional supply.  New construction has failed to keep up with and meet new housing growth or replace existing inventory.  More construction of for-sale and rental housing will alleviate housing cost pressures.”

 

Analyzing home values in the country’s 100 largest metropolitan areas based on housing inventory indicated 40% of metropolitan areas had an overvalued housing market, 28% were undervalued, and 32% were considered at value as of April 2018.  When evaluating only the top 50 markets, 52% were overvalued, 14% were undervalued and 34% were at-value.

 

 

From the mortgage industry, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed an increase in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) increased 4.1% during the week ended June 1, 2018.  The seasonally adjusted Purchase Index rose 4.0% from the week prior while the Refinance Index also increased by 4.0% from a week earlier.

 

Overall, the refinance portion of mortgage activity increased to 35.6% from 35.3% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 7.1% from 6.7% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.75% from 4.84% with points decreasing to 0.46 from 0.47.

 

For the week, the FNMA 4.0% coupon bond lost 34.4 basis points to close at $101.594 while the 10-year Treasury yield increased 4.8 basis points to end at 2.950%.  The three major stock indexes advanced during the week.

 

The Dow Jones Industrial Average gained 681.32 points to close at 25,316.53.  The NASDAQ Composite Index added 91.18 points to close at 7,645.51.  The S&P 500 Index added 44.41 points to close at 2,779.03.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 2.42%, the NASDAQ Composite Index has added 10.75%, and the S&P 500 Index has advanced 3.94%.

 

This past week, the national average 30-year mortgage rate increased to 4.68% from 4.60%; the 15-year mortgage rate rose to 4.11% from 4.04%; the 5/1 ARM mortgage rate increased to 3.94% from 3.93% while the FHA 30-year rate climbed to 4.42% from 4.38%.  Jumbo 30-year rates increased to 4.70% from 4.66%.

 

Economic Calendar – for the Week of June 11, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.594, -34.4 bp) traded within a narrower 42.2 basis point range between a weekly intraday high of 101.938 on Monday and a weekly intraday low of $101.516 on Thursday before closing the week at $101.594 on Friday.

 

The bond fell from its position sitting on the 50-day moving average (MA) and continued to slide lower during the week to end just below the 25-day MA.  Technically, the last sell signal from May 31 is still in effect and since the bond is still not “oversold,” there is some continuing risk for further mortgage bond price erosion this week.  A continuing price move toward the next support level will result in a slight increase in mortgage rates in the coming week.

 

 

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The major stock market indexes were “mixed” for the week with the Dow Jones Industrial Average modestly lower while the Nasdaq Composite and S&P 500 Indexes posted moderate gains.  Early in the holiday-shortened week, investors had to navigate political unrest in Italy and Spain as well as news of U.S. imposed tariffs on steel and aluminum from Canada, the European Union, and Mexico that sent stock prices lower and bond prices higher.  On Tuesday, the turmoil in Italy triggered such a demand for safe-haven securities that a rally in U.S. Treasuries sent the 10-year Treasury note’s yield to its largest one-day decline since June 2016 when Great Britain voted to leave the European Union.

 

However, the stock market bounced back on Friday following news that the summit with North Korea is back on as originally scheduled for June 12, and on a strong Employment Situation report for May.  The Employment Report showed a better than forecast increase in nonfarm payrolls (+223,000) and a lower than expected unemployment rate of 3.8%, an 18-year low.  Average hourly earnings matched expectations showing only moderate wage inflation with a month-over-month increase of 0.3%.

 

There were a couple of housing related reports released this past week.  Thursday, the National Association of Realtors released their Pending Home Sales Index data for April.  This forward-looking indicator based on contract signings showed an unexpected 1.3% decline to 106.4 in April from an upwardly revised 107.8 in March.  The Index was lower on an annualized basis (by 2.1%) for the fourth straight month.

 

Lawrence Yun, NAR chief economist, had this to say about the report: “Pending sales slipped in April and continued to stay within the same narrow range with little signs of breaking out… the underlying sales data, reveals that the demand for buying a home is very robust.  Listings are typically going under contract in under a month, and instances of multiple offers are increasingly common and pushing prices higher…For now, the economy is very healthy, job growth is holding steady and wages are slowly rising.  However, it all comes down to overall supply.  If more new and existing homes are listed for sale, it would allow home prices to moderate enough to stave off inflationary pressures and higher rates.”

 

From the mortgage industry, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey continued to show a drop in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) decreased 2.9% during the week ended May 25, 2018.  The seasonally adjusted Purchase Index fell 2.0% from the week prior while the Refinance Index decreased by 5.0% to its lowest level since December 2000.

 

Overall, the refinance portion of mortgage activity fell to 35.3% from 35.7% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 6.7% from 6.8% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.84% from 4.86% with points decreasing to 0.47 from 0.52.

 

For the week, the FNMA 4.0% coupon bond gained 7.9 basis points to close at $101.938 while the 10-year Treasury yield decreased 2.9 basis points to end at 2.902%.  The Dow Jones Industrial Average lost 117.88 points to close at 24,635.21.  The NASDAQ Composite Index added 120.48 points to close at 7,554.33.  The S&P 500 Index gained 13.29 points to close at 2,734.62.  Year to date on a total return basis, the Dow Jones Industrial Average has lost 0.34%, the NASDAQ Composite Index has added 9.43%, and the S&P 500 Index has advanced 2.28%.

 

This past week, the national average 30-year mortgage rate decreased to 4.60% from 4.61%; the 15-year mortgage rate was unchanged at 4.04%; the 5/1 ARM mortgage rate decreased to 3.93% from 3.95% while the FHA 30-year rate fell to 4.38% from 4.40%.  Jumbo 30-year rates increased to 4.66% from 4.65%.

 

Economic Calendar – for the Week of June 4, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.938, +7.9 bp) traded within a narrower 75.0 basis point range between a weekly intraday high of 102.578 on Tuesday and a weekly intraday low of $101.828 on Friday before closing the week at $101.938 on Friday.  After moving above resistance at the 50-day moving average (MA) and running into the 100-day MA on Tuesday, the bond traded back to the 50-day MA by Friday’s close.  This action resulted in a new sell signal from a negative stochastic crossover from an “overbought” position.  As a result, we could see a move down toward the 25-day MA resulting in lower bond prices and slightly higher mortgage rates.

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The major stock market indexes managed to grind out some marginal gains as investors reflected on a torrent of uncertain geopolitical news centered on U.S.-China trade negotiations and the U.S.-North Korea summit “canceled” last Thursday by President Trump.  Still, White House press secretary Sarah Sanders stated a “pre-advance team for Singapore will leave as scheduled in order to prepare should the summit take place.”  This uncertainty coupled with a “dovish” set of Federal Reserve minutes from the May FOMC meeting increased demand for “safe-haven” assets such as Treasuries and mortgage bonds to drive bond yields noticeably lower for the week.

 

The FOMC minutes suggested there will be a rate hike at the June Fed meeting, as widely expected, but also implied the Fed may not be as aggressive with its pace of future rate hikes as previously thought.  The minutes indicated Fed officials would be willing to let inflation run temporarily above their stated 2.0% target and this took some pressure off of the bond market.  A sharp sell-off in crude oil prices was also a contributing factor as reports surfaced that Russia and Saudi Arabia would soon boost oil production in response to significantly lower production in Venezuela, a country with the highest known oil reserves in the world, but whose economy is in shambles.

 

There were several housing related reports released this past week.  The Commerce Department reported last Wednesday that purchases of newly built single-family homes fell 1.5% to a seasonally adjusted annual rate of 662,000 in April.  However, economists had forecast a larger 2.2% drop.  Housing market inventory remains extremely tight, helping to drive up home prices. The average new home sales price climbed to $407,300 in April, the highest price since records have been kept beginning in 1963.  At the current sales pace, there was a 5.4-month supply of new homes on the market by the end of March.

Thursday, the National Association of Realtors reported Existing Home Sales fell 2.5% month-over-month in April to a seasonally adjusted annual rate of 5.46 million.  This was below the consensus forecast of 5.57 million and lower than the 5.60 million in March.  Median prices of existing homes for sale for all housing types increased 5.3% to $257,900 while those for existing single-family homes increased 5.5% from a year ago to $259,900.  While the inventory of homes for sale at the end of April increased 9.8% to 1.80 million, this is still 6.3% lower than the same period a year ago. At the current sales pace, unsold existing home inventory is only at a 4.0-month supply compared to the more normal 6.0-month supply characteristic of a more balanced market.

 

From the mortgage industry, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey continued to show a decline in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) decreased 2.6% during the week ended May 18, 2018.  The seasonally adjusted Purchase Index fell 2.0% from the week prior while the Refinance Index decreased by 4.0% to its lowest level since December 2000.

 

Overall, the refinance portion of mortgage activity fell to 35.7% from 35.9% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 6.8% from 6.5% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.86%, its highest level since April 2011, from 4.77% with points increasing to 0.52.

 

For the week, the FNMA 4.0% coupon bond gained 59.3 basis points to close at $101.859 while the 10-year Treasury yield decreased 12.9 basis points to end at 2.931%.  The three major stock indexes ended modestly higher for the week.

 

The Dow Jones Industrial Average gained 38.00 points to close at 24,753.09.  The NASDAQ Composite Index added 79.51 points to close at 7,433.85.  The S&P 500 Index rose 8.36 points to close at 2,721.33.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 0.14%, the NASDAQ Composite Index has added 7.68%, and the S&P 500 Index has advanced 1.78%.

 

This past week, the national average 30-year mortgage rate decreased to 4.61% from 4.78%; the 15-year mortgage rate fell to 4.04% from 4.21%; the 5/1 ARM mortgage rate decreased to 3.95% from 4.00% while the FHA 30-year rate dropped to 4.40% from 4.50%.  Jumbo 30-year rates decreased to 4.65% from 4.80%.

 

Economic Calendar – for the Week of May 28, 2018

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.859, +59.3 bp) traded within a narrower 76.6 basis point range between a weekly intraday high of 101.891 on Friday and a weekly intraday low of $101.125 on Monday and Tuesday before closing the week at $101.859 on Friday.  As predicted in last week’s newsletter, the bond did manage to trade higher during the week to set up a test of overhead resistance now located at the 50-day moving average and the 76.4% Fibonacci retracement level.

 

Now approaching “Overbought” levels, it will be difficult from a technical perspective for the bond to pass this test and break above this formidable layer of resistance, and we could see bond prices turned away from the 50-day moving average resulting in slightly worse mortgage rates.  However, there is a plethora of potential market-moving economic news headed our way this week headlined by the May employment report.  Should the week’s economic data disappoint stock investors, we could see bond prices improve and break above resistance resulting in an improvement in rates.

 

 

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The three major stock market indexes plus mortgage bonds ended the week modestly lower after strong economic data elevated fears of higher interest rates.  The week’s solid economic data sent the yield on the benchmark 10-year Treasury note up to 3.12% on Thursday, its highest level in seven years.

 

In economic news, the Commerce Department reported retail sales increased by 0.3% in April.  Although this figure matched the consensus forecast, the government revised the sales data from February and March significantly higher.  With current labor market trends driving up wage income at an annualized rate of about 4.5%, retail spending growth should continue to trend higher over the coming months.  Furthermore, the New York Empire State and Philadelphia Fed Manufacturing Indexes for May both showed significantly more manufacturing growth than expected.

 

There were several housing related reports released this past week.  Tuesday, the National Association of Home Builders (NAHB) Housing Market Index (HMI), a gauge of builder opinion on the relative level of current and future single-family home sales, came in with a reading of 70 for May, slightly higher than the consensus forecast of 69 and April’s downwardly revised reading of 68.  NAHB Chairman Randy Noel remarked “The solid May report shows that builders are buoyed by growing consumer demand for single-family homes.  However, the record-high cost of lumber is hurting builders’ bottom lines and making it more difficult to produce competitively priced houses for newcomers to the market.”

 

Wednesday, the U.S. Census Bureau and the Department of Housing and Urban Development reported new Housing Starts in April reached a seasonally adjusted annual rate of 1.287 million.  This was a decline of 3.7% from the upwardly revised March pace of 1.336 million but was an increase of 10.5% compared with the April 2017 rate of 1.165 million.  The consensus forecast called for a rate of around 1.325 million for April.  Meanwhile, the seasonally adjusted rate of new Building Permits fell to 1.352 million, down 1.8% from the upwardly revised February rate of 1.377 million, but 7.7% higher than the April 2017 rate.

 

In the single-family home category, housing permits rose month over month in April from a revised annual rate of 851,000 in March to a seasonally adjusted annual rate of 859,000.  The rate rose 7.9% year over year.  Danielle Hale, chief economist for Realtor.com, had this to say about the report:  “We saw 894,000 single-family housing starts in April, a slight step up from an upwardly revised March figure.  We remain significantly behind a normal level of 1.2 million starts.  In fact, if single-family starts continue at the strong yearly growth rate we saw in April, it will be fall 2019 before annual single-family starts break the 1 million mark consistently — which is still 17 percent lower than normal.”

 

 

From the mortgage industry, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed a drop in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) decreased 2.7% during the week ended May 11, 2018.  The seasonally adjusted Purchase Index fell 2.0% from the week prior while the Refinance Index decreased by 4.0% to its lowest level since August 2008.

 

Overall, the refinance portion of mortgage activity fell to 35.9% from 36.3% of total applications from the prior week, its lowest level since September 2008.  The adjustable-rate mortgage share of activity was unchanged at 6.5% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.77% from 4.78% with points decreasing to 0.35 from 0.36.

 

For the week, the FNMA 4.0% coupon bond lost 39.0 basis points to close at $101.266 while the 10-year Treasury yield increased 9.05 basis points to end at 3.06%.  The three major stock indexes ended lower for the week.

 

The Dow Jones Industrial Average fell 116.08 points to close at 24,715.09.  The NASDAQ Composite Index dropped 48.54 points to close at 7,354.34.  The S&P 500 Index lost 14.75 points to close at 2,712.97.  Year to date on a total return basis, the Dow Jones Industrial Average has dropped 0.02%, the NASDAQ Composite Index has gained 6.53%, and the S&P 500 Index has advanced 1.47%.

 

This past week, the national average 30-year mortgage rate increased to 4.78% from 4.65%; the 15-year mortgage rate rose to 4.21% from 4.05%; the 5/1 ARM mortgage rate increased to 4.00% from 3.84% while the FHA 30-year rate rose to 4.50% from 4.45%.  Jumbo 30-year rates increased to 4.80% from 4.68%.

 

Economic Calendar – for the Week of May 21, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.266, -39.0 bp) traded within a wider 98.1 basis point range between a weekly intraday high of 101.641 on Monday and a weekly intraday low of $100.66 on Thursday before closing the week at $101.266 on Friday.  The bond had a positive bounce off of support on Thursday and Friday from a deeply oversold position resulting in a positive stochastic crossover buy signal.  From a technical perspective, the bond should trade up for a test of overhead resistance in the coming week, and should this happen; mortgage rates should undergo a slight improvement.

 

 

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The stock market registered solid gains for the week propelled by solid corporate earnings reports, economic news, and geopolitical events.  In fact, the S&P 500 Index recorded its best weekly advance in two months, closing above its 100-day moving average for the first time since the middle of March.  Meanwhile, the yield on the benchmark 10-year Treasury note briefly touched the psychologically important 3% barrier for the first time since April 26, but ended 1.80 basis points lower for the week at 2.97%.

 

The volume of first quarter corporate earnings reports is winding down, and overall, they have been very favorable for the stock market.  Data and analytics firm FactSet is projecting overall earnings for the S&P 500 have grown by 24.9% for the quarter over the prior year with nearly four out of five companies beating analysts’ earnings and revenue estimates.  Rising oil prices have also pushed energy sector stocks higher during the week.

 

Oil prices jumped on President Trump’s decision to pull the U.S. out of the Iran nuclear agreement while restoring sanctions on Iran.  Military actions between Iran and Israel further supported oil prices when Israel struck Iran’s military installations in Syria in response to an Iranian missile attack on the Israeli-held Golan Heights.  Iran is OPEC’s third-largest oil exporter, and the threat of continuing military conflict within the oil-rich Middle East prompted speculators to bet on a disruption to crude oil supply on the global market.  West Texas Intermediate crude oil reached a new three-and-a-half year high at $71.26 per barrel.

 

On the economic front, investors received some welcome inflation data on Thursday from the April Consumer Price Index (CPI) report.  Total inflation at the consumer level was reported at +0.2% and came in slightly below the consensus estimate of +0.3%.  The Core CPI, which excludes food and energy, increased only 0.1% and was below the consensus forecast of 0.2%.  This data may prompt the Federal Reserve to be less aggressive in raising interest rates this year.

 

There were only a couple housing related reports released this past week.  CoreLogic released their Loan Performance Insights Report for February 2018 showing the number of loans 30 or more days past due declined from 4.9% to 4.8%.  The number of seriously delinquent loans of 90 or more days past due remained stable at 2.1% while those in foreclosure remained stable at 0.6%.

 

Dr. Frank Nothaft, chief economist for CoreLogic, stated “Last year’s hurricanes continue to have an effect on loan performance in affected markets, showing up in statewide data.  Serious delinquency rates in February were 50% higher than in August 2017 in Texas, and nearly double in Florida, even though the wind and flood damage was primarily in coastal markets.  In Puerto Rico, the damage was widespread.  Serious delinquency rates were up five-fold over the August-to-February period, with a significant increase in all metropolitan areas there.”

 

 

From the mortgage industry, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed a slight decline in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) decreased 0.4% during the week ended May 4, 2018.  The seasonally adjusted Purchase Index fell 0.2% from the week prior while the Refinance Index decreased by 1.0%.

 

Overall, the refinance portion of mortgage activity fell to 36.3% from 36.5% of total applications from the prior week, its lowest level since September 2008.  The adjustable-rate mortgage share of activity decreased to 6.5% from 6.7% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.78% from 4.80% with points decreasing to 0.50 from 0.53.

 

For the week, the FNMA 4.0% coupon bond lost 18.8 basis points to close at $101.656 while the 10-year Treasury yield decreased 1.80 basis points to end at 2.9695%.  The major stock indexes moved higher for the week.

 

The Dow Jones Industrial Average advanced 568.66 points to close at 24,831.17.  The NASDAQ Composite Index gained 193.26 points to close at 7,402.88.  The S&P 500 Index added 64.30 points to close at 2,727.72.  Year to date on a total return basis, the Dow Jones Industrial Average has added 0.45%, the NASDAQ Composite Index has gained 7.24%, and the S&P 500 Index has advanced 2.02%.

 

This past week, the national average 30-year mortgage rate increased to 4.65% from 4.62%; the 15-year mortgage rate rose to 4.05% from 4.00%; the 5/1 ARM mortgage rate increased to 3.84% from 3.78% while the FHA 30-year rate stayed unchanged at 4.45%.  Jumbo 30-year rates were also unchanged at 4.68%.

 

Economic Calendar – for the Week of May 14, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.656, -18.8 bp) traded within a slightly wider 53.1 basis point range between a weekly intraday high of 101.922 on Monday and a weekly intraday low of $101.392 on Friday before closing the week at $101.656 on Friday.  The bond looks like it will continue to be range-bound this coming week, trading between the dual bands of support and resistance shown on the chart below.  As a result, mortgage rates should remain relatively stable this week.

 

 

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The stock market seemed to lack conviction this past week as investors had to wade through a plethora of corporate earnings, including technology giant Apple’s quarterly report, in addition to the latest monetary policy decision from the Fed and the Employment Situation report for April.  As a result, the major stock indexes ended “mixed” for the week with the Dow Jones Industrial Average and S&P 500 Index edging lower while the NASDAQ Composite Index moved slightly higher.  The 10-year Treasury yield slipped slightly lower at 2.95% after approaching 3% on Wednesday.

 

The Fed’s latest monetary policy decision arrived Wednesday afternoon without any real surprises. As expected, Fed officials unanimously decided to leave the federal funds target range unchanged at 1.50% to 1.75%.  However, the Fed’s policy statement led investors to believe there will be a rate hike at their June meeting with the possibility for another one to two rate hikes before the end of the year.  Indeed, the latest probability reading from the Fed Fund Futures market now stands at 100% for a 25 basis point rate hike at the Fed’s June 13 FOMC meeting.

 

The Employment Situation (Jobs) report for April was released Friday morning, showing a lower than forecast 164,000 increase in nonfarm payrolls.  Although this was lower than the consensus estimate of 190,000, upwardly revised readings for the prior two months balanced the shortfall.  Average hourly earnings growth of +0.2% matched expectations while the unemployment rate fell to 3.9%, the lowest it has been in 17.5 years.  The reason the unemployment rate fell below 4% was not due to new job formation, but as a result of 236,000 people dropping out of the labor force during the month.

 

There were several housing related reports released this past week.  The National Association of Realtors® (NAR) reported Pending Home Sales edged higher in March by 0.4%.  This was below the consensus forecast calling for a 1.5% gain, and was constrained by continuing tight inventory levels and appreciating home values that are making it difficult for prospective buyers to find affordable homes to buy.  NAR chief economist, Lawrence Yun, remarked “Healthy economic conditions are creating considerable demand for purchasing a home, but not all buyers are able to sign contracts because of the lack of choices in inventory.  Steady price growth and the swift pace listings are coming off the market are proof that more supply is needed to fully satisfy demand.”

 

The U.S. Census Bureau announced total Construction Spending fell 1.7% in March following an upwardly revised 1.0% increase for February.  Private construction spending fell due to a 3.5% decline in residential spending including a 0.4% drop in single-family construction spending, and a 0.4% decline in nonresidential spending led by a 2.2% decline in commercial spending.  Year-over-year, total construction spending was up 3.6%, with public construction spending 3.0% higher and private construction spending up 3.9%.

CoreLogic® released their latest Home Price Index (HPI™) and HPI Forecast™ for March 2018, showing home prices increased both on a year-over-year and month-over-month basis.  Home prices increased nationally by 7% year-over-year from March 2017 to March 2018, and by 1.4% in March 2018 on a month-over-month basis.  Furthermore, the CoreLogic HPI Forecast shows the national home-price index is projected to continue to increase by 5.2% on a year-over-year basis from March 2018 to March 2019.  Dr. Frank Nothaft, chief economist for CoreLogic, stated “Home prices grew briskly in the first quarter of 2018.  High demand and limited supply have pushed home prices above where they were in early 2006.  New construction still lags historically normal levels, keeping upward pressure on prices.”

 

 

From the mortgage industry, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed a decline in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) decreased 2.5% during the week ended April 27, 2018.  The seasonally adjusted Purchase Index fell 2.0% from the week prior while the Refinance Index decreased by 4.0%.

 

Overall, the refinance portion of mortgage activity fell to 36.5% from 37.2% of total applications from the prior week, its lowest level since September 2008.  The adjustable-rate mortgage share of activity increased to 6.7% from 6.5% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.80% from 4.73%, its highest level since September 2013.  Points increased to 0.53 from 0.49.

 

For the week, the FNMA 4.0% coupon bond gained 3.1 basis points to close at $101.844 while the 10-year Treasury yield decreased 0.72 of one basis point to end at 2.9515%.  The major stock indexes ended “mixed” for the week.

 

The Dow Jones Industrial Average fell 48.68 points to close at 24,262.51.  The NASDAQ Composite Index gained 89.82 points to close at 7,209.62.  The S&P 500 Index lost 6.49 points to close at 2,663.42.  Year to date on a total return basis, the Dow Jones Industrial Average has fallen 1.85%, the NASDAQ Composite Index has gained 4.44%, and the S&P 500 Index has dropped 0.38%.

 

This past week, the national average 30-year mortgage rate decreased to 4.62% from 4.64%; the 15-year mortgage rate fell to 4.00% from 4.02%; the 5/1 ARM mortgage rate remained unchanged at 3.78% while the FHA 30-year rate stayed unchanged at 4.45%.  Jumbo 30-year rates were also unchanged at 4.68%.

Economic Calendar – for the Week of May 7, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.844, +3.1 bp) traded within a narrower 48.4 basis point range between a weekly intraday low of $101.516 on Wednesday and a weekly intraday high of $102.00 on Friday before closing the week at $101.844 on Friday.  The bond looks like it will be range-bound this coming week, trading between dual bands of support and resistance.  This should result in relatively stable mortgage rates this week.

 

 

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Market action in stocks and bonds was driven by a combination of 1st Quarter earnings reports, economic news, and geopolitical news of a historic meeting between the leaders of North and South Korea, who agreed on Friday to work to remove all nuclear weapons from the Korean Peninsula and, within the year, pursue talks with the United States to declare an official end to the Korean War.

 

This week past week more than a third of S&P 500 companies reported their earnings results and they were mostly better than expected.  However, several companies including Caterpillar provided forward guidance that was worse than anticipated, helping to send stock prices lower for the week while at least temporarily boosting bond prices on Thursday and Friday.  Caterpillar helped to take the Dow lower after saying in its post-earnings conference call that margins in the first quarter will be the “high water mark” for the year.

 

Other than earnings reports, investors closely monitored Treasury yields, which reached new multi-year highs on Wednesday before retreating on Thursday and Friday.  The benchmark 10-year Treasury yield crossed above the psychologically important 3.0% mark for the first time in over four years, reaching 3.03% before closing the week at 2.96%.

In economic news, 1st quarter Gross Domestic Product (GDP) showed the US economy grew by 2.3%, which was higher than expectations of 2.0%, but lower than the fourth quarter’s growth rate of 2.9%.  Weaker consumer spending in the first quarter was largely responsible with only a 1.1% increase following an increase of 4.0% in the fourth quarter.

 

In housing, the National Association of Realtors reported Existing Home Sales increased 1.1% month-over-month in March to a seasonally adjusted annual rate of 5.60 million, slightly above the consensus forecast of 5.57 million.  The median existing home price for all housing types increased 5.8% to $250,400, while the median existing single-family home price increased 5.9% from a year ago to $252,100.  Home inventory for sale at the end of March increased 5.7% to 1.67 million, but this is 7.2% lower than the same period a year ago.  Unsold inventory is at a 3.6-month supply at the current rate of sales.  The low inventory of existing homes for sale coupled with high prices and rising mortgage rates continues to hinder overall sales.

 

Further, the Census Bureau and the Department of Housing and Urban Development reported New Home Sales in March at a seasonally adjusted annual rate of 694,000 versus expectations for 631,000.  This was a 4.0% month-over-month increase above an upwardly revised February rate of 667,000.  The median sales price of new houses sold in March was $337,200, a year-over-year increase of 4.8%.  The average sales price dipped 3.8% to $369,900.  Based on the current rate of sales, the inventory of new homes for sale fell to a 5.2-months’ supply, versus 5.4 months in February and 5.0 months in the year-ago period.

 

From the mortgage industry, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed a drop in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) decreased 0.2% during the week ended April 20, 2018.  The seasonally adjusted Purchase Index was unchanged from the week prior while the Refinance Index decreased by 0.3%.

 

Overall, the refinance portion of mortgage activity fell to 37.2% from 37.6% of total applications from the prior week, its lowest level since September 2008.  The adjustable-rate mortgage share of activity increased to 6.5% from 6.6% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.73% from 4.66%, its highest level since September 2013.  Points increased to 0.49 from 0.46.

 

For the week, the FNMA 4.0% coupon bond gained 12.5 basis points to close at $101.813 while the 10-year Treasury yield decreased 0.15 of one basis point to end at 2.9587%.  The major stock indexes moved modestly lower during the week.

 

The Dow Jones Industrial Average dropped 151.75 points to close at 24,311.19.  The NASDAQ Composite Index fell 26.33 points to close at 7,119.80.  The S&P 500 Index lost 0.23 points to close at 2,669.91.  Year to date on a total return basis, the Dow Jones Industrial Average has fallen 1.65%, the NASDAQ Composite Index has gained 3.13%, and the S&P 500 Index has lost 0.14%.

 

This past week, the national average 30-year mortgage rate increased to 4.61% from 4.58%; the 15-year mortgage rate rose to 3.99% from 3.95%; the 5/1 ARM mortgage rate remained unchanged at 3.77% while the FHA 30-year rate moved from 4.37% to 4.43%.  Jumbo 30-year rates rose to 4.65% from 4.59%.

 

Economic Calendar – for the Week of April 30, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.813, +12.5 bp) traded within a wider 64.1 basis point range between a weekly intraday low of $101.172 on Wednesday and a weekly intraday high of $101.813 on Friday before closing the week at $101.813 on Friday.

 

As anticipated in last week’s newsletter, mortgage bond prices first fell for a test technical support before managing to bounce higher during the latter half of the week.  The rebound on Thursday resulted in a positive stochastic crossover buy signal from a deeply oversold position.  There was also positive follow through on Friday with the bond closing at its high for the day.

 

From a purely technical basis, the bond should move higher for a test of resistance, and this would result in a slight improvement in rates.  However, there is a potential market-moving personal consumption expenditures (PCE) report looming on Monday.  This report is one of the Federal Reserve’s favorite measures of inflation, and if the data shows hotter than expected inflation we could see bond prices retreat back toward support resulting in slightly worse rates.

 

Furthermore, a Preliminary 1st Quarter Unit Labor Cost report on Thursday could show a rise in wage inflation that would be negative for bond prices.  The week’s economic reports will also be highlighted by the April Jobs Report that could also be a market mover impacting mortgage rates.  While the technical picture currently looks favorable, significant economic news often “trumps” technical signals.

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The stock market bounced back this past week as concerns about a possible trade war with China faded after several U.S. officials, including Treasury Secretary Steven Mnuchin, and Chinese President Xi Jinping downplayed talk of a retaliatory trade war.  In fact, Xi Jinping stated in a speech at the Boao Forum on Tuesday that he “plans to significantly cut tariffs on imported automobiles, reduce duties on other imported goods, and improve the intellectual property rights of foreign firms.”  Fears of a trade war with China were then replaced with rising geopolitical tension between the U.S. and Russia.

 

A suspected chemical attack from the Russian-supported Syrian government on the rebel-held town of Douma, Syria on April 7th brought strong condemnation and threats of a retaliatory strike against Syria from the U.S., Great Britain, and France.  Russia replied last Wednesday that it would shoot down any missiles fired at Syria prompting President Trump to state “get ready Russia, because they will be coming.”  And come they did late Friday evening when a military coalition from the U.S., Great Britain, and France struck several chemical weapons sites in Syria.  As a result, we will likely see a sharp increase in volatility this week in the financial markets with the rising tensions between Russia and coalition forces and the uncertainty that comes from military action in Syria.

The week’s economic reports took a backseat to geopolitical news, receiving a muted response from investors.  Minutes from the Fed’s March FOMC meeting were released containing no surprises.  The latest round of inflation data from the March Producer Price Index (PPI) and Consumer Price Index (CPI) reports revealed a stiffening inflation trend with the PPI rising +0.3% while the core CPI advanced 0.2% for the month.  This will keep the Fed on plan to raise rates at least two more times this year with the next 25 basis point hike likely to occur at the June FOMC meeting with a probability of 95.0%.

 

According to the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey, there was a decline in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) decreased by 1.9% during the week ended April 6, 2018.  The seasonally adjusted Purchase Index decreased by 2.0% from the week prior while the Refinance Index also decreased by 2.0%.

 

Overall, the refinance portion of mortgage activity fell to 38.4% from 38.5% of total applications from the prior week, its lowest level since September 2008.  The adjustable-rate mortgage share of activity fell to 6.3% from 6.5% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance fell to 4.66% from 4.69% with points increasing to 0.46 from 0.43.

 

For the week, the FNMA 4.0% coupon bond fell 32.8 basis points to close at $102.266 while the 10-year Treasury yield increased 4.95 basis points to end at 2.8248%.  The major stock indexes moved higher during the week.

 

The Dow Jones Industrial Average gained 427.38 points to close at 24,360.14.  The NASDAQ Composite Index advanced 191.54 points to close at 7,106.65.  The S&P 500 Index added 51.83 points to close at 2,656.30.  Year to date on a total return basis, the Dow Jones Industrial Average has fallen 3.18%, the NASDAQ Composite Index has gained 0.17%, and the S&P 500 Index has lost 2.59%.

 

This past week, the national average 30-year mortgage rate increased to 4.50% from 4.48%; the 15-year mortgage rate rose to 3.89% from 3.86%; the 5/1 ARM mortgage rate increased to 3.68% from 3.65% while the FHA 30-year rate was unchanged at 4.25%.  Jumbo 30-year rates rose to 4.51% from 4.50%.

 

Economic Calendar – for the Week of April 16, 2018

Economic reports having the greatest potential impact on the financial markets are highlighted in bold

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Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($102.27, -32.8 bp) traded within a wider 60.9 basis point range between a weekly intraday high of $102.625 on Monday and a weekly intraday low of $102.016 on Thursday before closing the week at $102.266 on Friday.

 

Mortgage bonds lost ground during the week as the stock market advanced and failed to remain above a declining 50-day moving average while also falling below the 25-day moving average.  These two moving averages now form a tight band of overhead resistance.  However, Friday’s trading resulted in a potentially bullish two-day Harami candlestick pattern signaling a possible change in market direction higher that will require confirmation on Monday with a positive candlestick with a higher closing price.

 

With a coalition of U.S., Great Britain, and French military forces striking chemical weapons installations in Syria late Friday evening to significantly increase geopolitical tensions with Syrian ally Russia, we will likely see increased volatility in the stock and crude oil markets with investors moving money from stocks into bonds in a “flight to safety” trade.  If this anticipated reaction is strong enough, it would be bullish for mortgage bonds and would perhaps send prices above both resistance levels resulting in a slight improvement in mortgage rates this coming week.

 

 

 

 

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