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Italian
Uncertainty Helps Mortgage Rates
The
biggest influence on mortgage rates this week came from the Italian
election, which reignited investor concerns about Europe
and prompted a flight to safer assets. Fed Chief Bernanke continued to show
strong support for the Fed's bond buying program, which was also positive
for mortgage rates. As a result, mortgage rates ended the week lower.
Monday's
election in Italy
showed very close results between the top three candidates, and it will be
very difficult to establish a coalition government when no party has a
majority. A long period of negotiations will take place, and another
election may be required. What is clear is that there is widespread
opposition in Italy
to the austerity measures supported by the European Union (EU). Investors
are concerned that the third largest economy in the EU will scale back
reform measures, which could increase the risk that Italy will default on its debt
or leave the EU. Investors shifted to safer assets, including US mortgage-backed
securities (MBS), which helped mortgage rates improve.
Topping
the US
economic news this week was the implementation of mandated across the board
government spending cuts on March 1 at midnight. Government spending will
be reduced by $85 billion over the next seven months unless action is
taken. While the cuts will slow economic growth to some degree, this
represents just 2% of government spending, and the reaction in financial
markets has been minimal. Investors are looking ahead to the more significant
March 27 deadline. Last year, Congress passed a "stop-gap"
continuing resolution to fund the federal government through March 27. New
legislation must be passed before then to avert a government shutdown.
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Also Notable:
- Fourth quarter GDP was revised higher to 0.1%
from -0.1%
- Core PCE inflation was just 1.3% higher than one
year ago
- Pending Home Sales rose 5% to the highest level
since April 2010
- Moodys cut the credit rating of the sovereign
debt of the UK
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Average
30 yr fixed rate:
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Last
week:
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+0.02%
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This
week:
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-0.07%
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Stocks
(weekly):
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Dow:
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14,050
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+50
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NASDAQ:
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3,150
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+10
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Week
Ahead
The
biggest economic report next week will be the important Employment data on
Friday. As usual, this data on the number of jobs, the Unemployment Rate,
and wage inflation will be the most highly anticipated economic data of the
month. Before the employment data, ISM Services will be released on
Tuesday. The Fed's Beige Book and Factory Orders will come out on
Wednesday. Productivity and the Trade Balance are scheduled for Thursday.
Negotiations on the US
budget and on Italian leadership could also have a significant impact next
week.
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To learn
more about news impacting interest rates and mortgage markets, go to www.mbsquoteline.com
To learn more about the newsletter, please call 800-627-1077
All material Copyright © Ress No. 1,
LTD and may not be reproduced without permission.
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