Brian Egan's Blog - Philadelphia Mortgage Advisors

Plymouth Meeting, PA 19462

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French Election and U.S. Data

A victory by Macron in the French election was viewed as negative for mortgage rates early in the week, while Friday's weaker than expected U.S. economic data was positive. These influences were roughly offsetting, and mortgage rates ended the week with little change.

Sunday's French Presidential election featured one pro-EU candidate, Macron, and one anti-EU candidate, Le Pen. While Macron remained comfortably ahead in the polls, investors still had to consider that an unexpected victory by Le Pen could lead to a French exit from the European Union (EU). Macron did win the election, and investor concerns were eased. They reacted by shifting back to riskier assets such as stocks, and away from safer assets such as mortgage-backed securities, causing a small increase in mortgage rates.

On Friday, a downside miss in key data on inflation and economic activity was good news for mortgage rates. The April core consumer price index (CPI), which excludes the volatile food and energy components, rose 0.1% from March, below the consensus of 0.2%. Core CPI was 1.9% higher than a year ago, down from 2.0% last month and from 2.3% in January.

For most of 2016, inflation appeared to be trending higher, but it has reversed direction so far this year. In addition, retail sales in April rose 0.4% from March, which was a nice improvement from the slight gains seen in March, but it was below the consensus for an increase of 0.6%. Weak consumer spending was a big factor in the slow GDP growth seen during the first quarter.

Looking ahead, it will be a light week for economic data. The NAHB housing confidence index will be released on Monday. Housing Starts and Industrial Production will come out on Tuesday. The Philadelphia Fed regional manufacturing index will be released on Thursday.

Mortgage News for the week ended May 5, 2017

May 5

1:38

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Mortgage Time

Mortgage Market News for the week ended May 05, 2017

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Philadelphia Mortgage Advisors

Plymouth Meeting, PA 19462

Fed Holds Steady

Wednesday's Fed meeting was viewed as slightly negative for mortgage rates. The success of Macron in holding his lead in the polls for the upcoming French election also was unfavorable. Friday's Employment report had little impact. As a result, mortgage rates ended the week a little higher.

As expected, the Fed made no change in the federal funds rate at Wednesday's meeting. There also was no change in the language describing the Fed's policy for maintaining a steady level for its large portfolio of Treasuries and MBS. According to the statement, Fed officials see the risks to the outlook for economic growth as "roughly balanced," and they expect inflation to climb to its 2.0% target over the medium term. Fed officials think that the weak economic growth seen early this year likely was "transitory." Some investors had hoped that the weaker data over the last couple of months might cause the Fed to consider slowing its pace of tightening. The statement provided no indication of this, however, which was negative for mortgage rates.

The pro-EU candidate in Sunday's French Presidential election, Macron, cleared his largest remaining hurdle on Wednesday when he performed well in a debate. Over the past week, he has held a lead of roughly 60% to 40% over the anti-EU candidate, Le Pen. After the debate, investors grew less concerned that France could exit the European Union (EU). They reacted by shifting back to riskier assets such as stocks, and away from safer assets such as mortgage-backed securities, causing a slight increase in mortgage rates.

Friday's important Employment report came in right on target and had little effect on financial markets. Against a consensus forecast of 190K, the economy added 211K jobs in April. The unemployment rate declined from 4.5% to 4.4%, below the consensus forecast, and the lowest level since May 2007.

Looking ahead, the final round of the French Presidential election will take place on Sunday. In the U.S., the big day will be Friday with the Retail Sales and CPI reports. Consumer spending accounts for about 70% of economic output in the U.S., and the retail sales data is a key indicator. The Consumer Price Index (CPI), a widely followed monthly inflation report, looks at the price change for goods and services which are purchased by consumers. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

Mortgage News for the week ended April 28, 2017

Apr 28

3:19

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Mortgage Time

Mortgage Market News for the week ended April 28, 2017

Compliments of

Philadelphia Mortgage Advisors

Plymouth Meeting, PA 19462

Europe Influences U.S. Markets

Over the past week, mortgage rates were influenced mainly by events in Europe. The outcome of Sunday's French election was bad for mortgage rates, while Thursday's European Central Bank meeting was mildly positive. The U.S. economic data had little impact. Mortgage rates ended the week a little higher.

One pro-EU candidate (Macron) and one anti-EU candidate (Le Pen) won the first round of Sunday's French Presidential election and will compete in the second round on May 7. Polls indicate that Macron is heavily favored to win the second round, which reduces some concerns that France will leave the European Union. Investors reacted by reversing the flight to safety trade which took place ahead of the election. This means that they shifted back to riskier assets such as stocks and out of safer assets such as mortgage-backed securities (MBS). The increased supply of MBS caused mortgage rates to rise.

At Thursday's meeting, the European Central Bank (ECB) made no policy changes, as widely expected. The tone of ECB President Draghi was more dovish than anticipated, however. Some investors had worried that ECB officials might hint at a reduction in bond purchases by the ECB. The fact that they did not was good news for mortgage rates.

The first reading for first quarter U.S. gross domestic product (GDP) released on Friday was 0.7%, below the consensus of 1.1%, and down from 2.1% in the fourth quarter of 2016. This was the slowest quarterly growth in three years. Weak consumer spending and a decline in inventories were a couple of the primary factors in the shortfall.

These components are volatile on a quarterly basis, and many economists believe that the weakness in the first quarter simply pushed some economic activity into later quarters. As a result, the report had little impact on mortgage rates.

Looking ahead, it will be a packed week. The next Fed meeting will take place on Wednesday. No change in rates is expected, but investors will be eager for guidance on the pace of future tightening. The key monthly Employment report will be released on Friday. Before that, important data on inflation, manufacturing, and services will be released. In addition, news about policies from the Trump administration or about the French election on May 7 could influence mortgage rates.

Mortgage News for the week ended April 21, 2017

Apr 7

5:10

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Mortgage Time

Mortgage Market News for the week ended April 21, 2017

Compliments of

Philadelphia Mortgage Advisors

Plymouth Meeting, PA 19462

Focus on French Election

It was a volatile week for mortgage rates ahead of Sunday's French election. The daily movements were offsetting, however, and mortgage rates ended the week with little change, remaining near the best levels of the year.

The first round of the French Presidential election will take place on Sunday. The two candidates who receive the most votes on Sunday will proceed to the second round of voting on May 7, and the latest polls show that the top four candidates are very close. Two of these four (Le Pen and Melenchon) favor exiting the EU. The possibility that an anti-EU candidate could win has caused investors to shift to safer assets, which has helped mortgage rates in recent weeks.

The French election is significant for global markets because France is a key member of the European Union (EU). If France were to exit the EU, it is very uncertain what the economic impact would be on the global economy. As a result, a strong showing by the anti-EU candidates likely would cause investors to shift additional funds into safer assets, which would be good for mortgage rates. If they do poorly, it is expected that investors would shift back into riskier assets, which would be negative for rates.

Friday's housing market data was encouraging. Sales of previously owned homes in March rose 4% from February to the highest level since February 2007. The median price was 7% higher than a year ago. Properties typically stayed on the market for a very short 34 days, down from 45 days in February.

Looking ahead, Sunday's French election is likely to influence U.S. markets on Monday. After that, New Home Sales will be released on Tuesday. Durable Orders and Pending Home Sales will come out on Thursday. The first reading for first quarter GDP, the broadest measure of economic activity, will be released on Friday. In addition, the next European Central Bank meeting will take place on Thursday.

Mortgage News for the week ended March 31, 2017

Mar 31

3:46

Category | General

Mortgage Time

Mortgage Market News for the week ended March 31, 2017

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Philadelphia Mortgage Advisors