Stocks Rally, Rates Rise

Mortgage Market News for the week ending October 9, 2015

Demand shifted from bonds to stocks over the past week. The economic data had little impact. As a result, mortgage rates ended the week a little higher.

Under most circumstances, mortgage rates improve when stocks decline, and the reverse is true as well. We have seen an example of this relationship over the last few weeks. During the second half of September, stocks declined and mortgage rates improved. The trend has reversed, however, as the Dow has climbed about 600 points over the past week, while mortgage rates have risen.

There were no major surprises in the Minutes from the September 17 Fed meeting released on Thursday. The Minutes revealed that Fed officials held off on a rate hike due to uncertainty that inflation will rise to their 2.0% target level. The Minutes also noted that weakness in other countries added to the downside risk for economic growth and inflation in the U.S. Since the September 17 Fed meeting, the U.S. economic data has indicated slowing growth, justifying the Fed’s decision and adding pressure for the Fed to hold rates steady longer.

Source: MBS Quoteline Weekly Newsletter