Rates Helped By News of Possible ECB Stimulus
The past couple of weeks have been dominated with talk of the possible December Fed rate increase. With a quarter point increase largely priced into the bond and mortgage markets, rates received some welcomed news from an overseas ally. Increased expectations for additional stimulus in Europe were positive for mortgage rates over the past week and ended slightly lower.
While Wednesday’s Minutes from the October 28 Fed meeting caused little reaction, the Minutes from the October 22 European Central Bank (ECB) meeting released on Thursday revealed a likely need for additional stimulus to boost the economies in the region. Investors raised their expectations that the ECB will announce an expansion of its bond buying program at its next meeting on December 3. Added demand from the ECB would lower bond yields around the world, including U.S. mortgage-backed securities (MBS). Mortgage rates fell a little on the possibility.
The single-family housing sector is still hot, with starts remaining near the best levels of the year. Single-family building permits, a leading indicator of future activity, rose to the highest level since December 2007.
Factors: Existing Home Sales will be released today. The second estimate for third quarter GDP will come out on Tuesday. Wednesday will be a packed day ahead of Thanksgiving with Durable Orders, New Home Sales, Personal Income, and the core PCE price index. Core PCE is the Fed’s preferred inflation indicator. Mortgage markets will be closed on Thursday and will close early on Friday in observance of Thanksgiving.
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