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Weekly Recap and the Financial Markets

Weekly Recap and the Financial Markets

News helped rates this past week and significantly outweighed the Fed’s hawkish comments. As a result, mortgage rates ended the week near the best levels of the year.

Friday’s employment report showed the economy adding only 98,000 jobs in March, just over half of what was expected. Apparently, weather played a larger than anticipated effect for the past couple of months. Incredibly warm weather likely boosted February results while a severe March storm slowed hiring last month. The economy added 59,000 construction industry in February but just 6,000 in March. Average job gains over the past quarter were strong at a monthly pace of 178,000. The downside miss in March was good for rates.

Two other events were positive for rates. House Speaker Paul Ryan said tax reform will take longer to accomplish than reforming health care. Tax reform might prove to be inflationary, so slower implementation is good for rates. Thursday night the U.S. launched the Syrian missile strike and investors shifted to safer assets, including mortgage-backed securities. This added demand helped mortgage rates.

The negative influence for rates was the hawkish tone of Wednesday’s March 15 minutes. These minutes revealed that should the economy perform as expected, we can expect the Fed to begin reducing its massive $4.5 trillion holdings of MBS and Treasuries before the end of 2017, earlier than previously expected. Increased supply of investments would be negative for the mortgage markets.

Investors will keep a close eye on Syria. Mortgage markets are closed on Good Friday, which will be the big day for economic data with Retail Sales and CPI. The JOLTS report is released today. The PPI comes out Thursday. Treasury auctions are today, Wednesday, and Thursday.

Posted on April 11, 2017 at 9:18 am by Rob Williams

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