Market Comment
Mortgage bond prices finished the week slightly lower which pushed rates higher. Rates swung back and forth throughout the week. Positive stocks Tuesday morning put some upward pressure on rates. That was quickly reversed mid week as a stock selloff ignited. We ended the week with some stock strength early Friday morning. The NAHB housing index was 60 versus the expected 61 reading. Consumer prices fell 0.1% in December versus the expected unchanged reading. The core, which excludes volatile food and energy, rose 0.1% versus the expected 0.2% increase which was rate friendly. Housing starts were 1149K. Analysts expected a higher reading of 1203K. Weekly jobless claims were 293K versus the expected 279K. Mortgage interest rates finished the week worse by approximately 1/4 of a discount point.
ECB QE The European Central Bank jumped back into the trading discussion as ECB President Draghi caused volatility in the global financial markets last week. Draghi indicated the ECB could ease policy at their March meeting amid growth concerns. He went on to commend Fed Chair Yellen for raising rates in the U.S. despite different conditions in the eurozone. Draghi stated, “The U.S. recovery is more advanced than what’s happening in the euro area and Japan, so it’s entirely natural that policies do differ, and they will be on a diverging path for a while.” Equities rallied across the globe at the expense of mortgage bonds in response to his remarks. This reversed some of the flight to quality buying of U.S. debt instruments earlier this month. The good news for U.S. borrowers is the signal that the global economic recovery is still wobbly. Now is a great time to take advantage of the historically favorable rates. |
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