Last Week Recap
Mortgage backed securities (MBS) lost 49 basis points from last Friday’s close, which caused 30 year fixed rates to move higher. This ended the bond rally that had lasted for the two weeks prior to last week.
MBS sell off when there is positive economic news. Last week’s data showed Durable Goods Orders much stronger than expected (4.2 vs 0.5) and the Consumer Sentiment Index rising from 84.1 to 85.1. Existing Home Sales missed the market expectations but was still robust. New Home Sales enjoyed some nice gains in terms of unit sales and price increases.
Demand for 7-year Treasury auction saw some decent demand but 5-year and 2-year auctions saw decreased demand.
MBS would have lost more ground (even higher rates for you) if it weren’t for a WSJ article that speculated that the Fed would change their language at this week’s FOMC meeting to calm the markets that they would not be increasing their rates for a long time. They will certainly leave their Fed Funds rate alone but they will eventually have to start to pull back on bond purchases and those bond purchases are what impacts your mortgage rates…not their Fed Fund rate.
This Week’s Agenda