John’s Finance Corner: Exploring Mortgage Rates and The Economy
Mortgage rates are intrinsically linked to the performance of 10-year treasury bonds. Investors buy and sell these bonds based on various economic indicators and the perceived strength or weakness of the economy. One of the key data points that influence the 10-year treasury bonds are the different inflation reports released monthly.
Last week, we received the Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures (PCE) report. Each inflation report includes an overall headline reading and a Core reading, which excludes food and energy from the equation. The PCE report data showed a drop of 0.1% to 2.6% year over year in the headline reading. The Core reading, which is the Fed’s target and stands at 2%, decreased by 0.2% to 2.6% year over year. This slight decrease helped improve the bond market and mortgage rates slightly.
As we kick off July, the bond market has been trending in the wrong direction. Many other Central Banks worldwide have seen significant increases in 10-year treasuries today, which has led to an increase in mortgage rates at the start of the week.
Despite this being a short week due to the July 4th Holiday, there is a substantial amount of important information due to be released which could impact the markets and mortgage rates. Tuesday will provide the latest Jolts jobs report, along with a press conference from Fed Chairman Powell. On Wednesday, we will receive the ADP payroll report as well as initial and continuing jobless claims. The markets will be closed on Thursday for July 4th. On Friday, we will receive payrolls, average hourly earnings, average weekly hours, and the crucial unemployment rate, which currently sits at 4%.
It is crucial to see some bond-positive data the rest of the week to offset the losses the market has seen so far today. Keep an eye out for Friday’s Bureau of Labor Statistics (BLS) report as well as the unemployment rate. The Fed has a soft target of keeping the unemployment rate at or below 4.1%. If we can improve on the current level, we should see mortgage rates improve slightly.
Stay tuned for more updates!
John Lamberg
Senior Loan Officer
Mobile 727.366.9947
Website ccm.com/john-lamberg
Email [email protected]
