Volatile Rates

Kristin HawkinsKristin Hawkins
Mortgage Consultant
FBC Mortgage, LLC


 Volatile Rates

U.S. bond yields again followed the lead of European yields over the past week, while U.S. economic data had little impact. After several volatile sessions, mortgage rates ended the week a little lower.

Slow economic growth in the eurozone and a new sovereign bond purchase program from the European Central Bank caused investors to push European bond yields to record low levels in April. The decline in yields spread to other markets around the world, including U.S. mortgage markets. Sentiment shifted a few weeks ago, however. With an improving economic outlook for much of Europe, yields on most European bonds were forced considerably higher. Again, other markets followed the lead of the eurozone. Investors are now left trying to determine the appropriate level for yields going forward. This is leading to increased volatility and outsized swings in U.S. mortgage rates.

In contrast to most of the U.S. economic data released this month, Tuesday’s Housing Starts report exceeded expectations by a wide margin. Single-family housing starts in April jumped 16% from March to the highest level since January 2008. Single-family building permits, a leading indicator of future activity, rose 4%. For a housing market which has been held back by a lack of inventory, this data was great news.

Looking ahead, Existing Home Sales will be released on May 21. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on May 22. CPI looks at the price change for finished goods which are sold to consumers. Durable Orders, an important indicator of economic activity, and New Home Sales will be released on May 26. There will be Treasury auctions on May 26, 27 and 28. In addition, news about Greece could influence global bond yields.

Single-Family Housing Starts

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