Market Comment
Mortgage bond prices finished the week higher which pushed mortgage interest rates lower. Durable goods orders fell 0.5% as expected which did not move the market much Tuesday. This was offset by stronger than expected data later that morning. New home sales were 517K versus the expected 510K. Consumer confidence was 95.4 versus the expected 94.9. Most of the gains came Wednesday afternoon and were realized Thursday morning at pricing. The Treasury auctions generally showed strong foreign demand. Weekly jobless claims were 282K versus the expected 270K which was rate friendly. Preliminary Q1 Gross Domestic Product fell 0.7% as expected. Consumer sentiment came in at 90.7 versus the expected 89.0. This was not rate friendly. Mortgage interest rates finished the week better by approximately 1/4 of a discount point.
Rate Outlook San Francisco Federal Reserve President John Williams said last week that “I expect they (The Federal Reserve) will be raising rates later this year.” Williams is a voting member of the Federal Reserve. He also noted, “The rest of the year is probably going to be better than Q1 and there’ll be a bounce back.” Williams reasoned, “I see above-trend growth for the rest of the year and therefore continued improvement in the labor market. The GDP growth for the whole year is probably going to be around 2 percent.” He continued, “If you look at those forecasts back from March you’ll see an adjustment over time from where we are now, gradually towards this 3.5 to 4 percent and normal level of Federal Funds rate.” There are no certainties in projections. However, a rising interest rate environment generally will put upward pressure on mortgage rates. Now is a great time to take advantage of historically low rates.
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