Daily Rate Update: May 28th-31st

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Friday – May 31, 2019

The fight-to-safety rages on this morning as global yields decline sharply with the German 10-year Bund yield at its lowest level ever … -0.22%. The bond buying was touched off by President Trump’s announcement that the US will impose tariffs on Mexican goods coming into the US until Mexico applies stricter measures to halt illegal immigration. Throw in the escalating China trade war, slowing global growth and increased fears of a US recession and you have investors across the globe searching for yield … which can be found here in the US.

US stocks are declining as “sell in May and go away” continues on this last day of the month due to the new and ongoing trade wars, slowing global growth along with recession fears here in the US. The closely watched S&P 500 has lost 5.3% in May, and as of this moment, is showing a poor technical signal by opening beneath its 200-day moving average. In the same time, the yield on the US Treasury Note has gone from 2.50% to the current level of 2.17%.

Inflation remained subdued in April as the annual Core PCE came in at 1.6%, well below the Fed’s target of 2%. Inflation around the globe also continues to decline. It would not surprise us to see long-term rates move even lower with the 10-year Note showing something in the 1%-handle yield in months ahead. The report went on to reveal that personal incomes and spending were better than expected. The low inflation environment will hold interest rates low for the foreseeable future.

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Thursday – May 30, 2019 

Pending home sales declined by 1.5% in April from March while also seeing a drop year-over-year, marking the 16th straight month of annual declines. Pending home sales occur when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. The only sector across the country that showed gains was the Midwest. Lawrence Yun, NAR chief economist said, “Though the latest monthly figure shows a mild decline in contract signings, mortgage applications and consumer confidence have been steadily rising. It’s inevitable for sales to turn higher in a few months.”

Economic growth remained strong in the first quarter of 2019 though corporate profits edged lower. Gross Domestic Product (GDP) rose 3.1% in Q1 2019, just below the first read of 3.2%. Within the numbers it showed that consumer spending rose 1.3% while inflation rose at a 1.4% pace year-over-year, well below the Fed’s target range of 2%. GDP measures the value of the goods and services produced within the US.

Americans filing for first-time unemployment benefits continue to near lows seen in the late 1960s as the labor market continues to strengthen. Weekly Initial Jobless Claims rose by 215,000 in the latest week, up modestly from the prior week. The four-week moving average of claims, which irons out seasonal abnormalities, fell 3,750 to 216,750.

Courtesy of Mortgage Market Guide

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Wednesday – May 29, 2019

Mortgage rates were unchanged in the latest week and remain at lows seen in January 2018 due in part to concerns over European economic growth along with US-China trade issues. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage remained at 4.33% with an average 0.42 in points. The Refinance Index fell 6% while the Purchase Index declined 1%. Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting said, “It is possible that the trade dispute is causing potential homeowners to hold off on buying, with the fear that further escalation – or the lack of resolution – may have adverse impacts on the economy and housing market.”

Bond prices across the globe are rising while yields decline in today’s trading session. In addition, US stocks continue to move lower in May. The flight-to-safety today is being fueled by weak data out of Germany along with fears of slowing global growth due in part to the trade issues with the US and China. The US 10-year yield fell to 2.22% this morning, a 20-month low. Current economic conditions are calling for a halt in any rate hikes by the US Federal Reserve, with chances of an interest cut now increasing.

Gas prices declined in the latest survey due in part to lower oil prices around the globe. Motor club AAA reports that the national average price for a regular gallon of gasoline fell to $2.82 on Tuesday, down two cents from last week, last month by six cents and down 16 cents from last year. However, AAA did say that a rise in demand for gas could push prices higher, but only by a few cents as the spring/summer driving season is underway.

Courtesy of Mortgage Market Guide

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Tuesday – May 28, 2019

Home price gains continued to cool in March and are moving down to more normal historical levels. The S&P Case-Shiller 20-City Home Price Index saw a 2.7% annual gain, down from the 3% annually recorded in February and well below the near-7% gains seen year-over-year in March 2018. “Home price gains continue to slow,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The patterns seen in the last year or more continue: year-over-year price gains in most cities are consistently shrinking. Double-digit annual gains have vanished.” The National Index rose 3.7% annually in March from 3.9% in February.

Americans recently surveyed across the nation respond that they feel the economy should continue to grow at a solid pace in the short-term which will continue to boost consumer spending. The Conference Board reports that its Consumer Confidence Index rose to 134.1 in May from 129.2 in April. The report went on to reveal that both business and employment expectations improved, though income prospects were mixed. “Consumer Confidence posted another gain in May and is now back to levels seen last Fall when the Index was hovering near 18-year highs,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.

Courtesy of Mortgage Market Guide

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