Mortgage Market News for the week ending November 9, 2012.
Two major factors were positive for mortgage rates this week. President Obama won the election, and concerns about Europe increased. As a result, mortgage rates ended the week lower.
The conventional wisdom was that an Obama victory would be positive for bonds and negative for stocks, and this was in fact the reaction in financial markets. Obama supports keeping Fed Chief Bernanke’s bond-buying policy in place, which is very favorable for bonds. In addition, Obama was considered less business friendly than Romney, and that, along with the risk of higher taxes on dividends and capital gains, caused investors to sell stocks and buy bonds.
Nearly all of the news out of Europe was negative this week. European Union (EU) forecasts for economic growth for the next two years were downgraded more than expected, and EU officials warned of greater downside risks. German economic growth data fell short of consensus forecasts. Greek leaders passed a series of austerity measures required to receive additional aid, but widespread riots and protests took place during the vote. Concerns about Europe cause investors to shift funds to safer assets, including US mortgage-backed securities (MBS).
• Consumer Sentiment rose to the highest level in more than five years
• The Trade Deficit declined to the lowest level since December 2010
• The Dow declined below 13,000 for the first time since early August
• The European Central Bank (ECB) made no change in rates
Average 30 yr fixed rate:
Last week: 0.00%
This week: -0.10%
Dow: 12,800 -400
NASDAQ: 2,900 -100
The most significant economic data next week will be the monthly inflation reports. The Producer Price Index (PPI) focuses on the increase in prices of “intermediate” goods used by companies to produce finished products and will come out on Wednesday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Thursday. CPI looks at the price change for those finished goods which are sold to consumers. In addition, Retail Sales will be released on Wednesday, along with the detailed FOMC Minutes from the October 24 Fed meeting. Retail Sales account for about 70% of economic activity. Industrial Production will come out on Friday. Investors also will be waiting for news about whether Greece will receive its next scheduled round of European aid. Mortgage markets will be closed on Monday in observance of Veterans Day.
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