This morning the mortgage market was the beneficiary of news of weaker-than-expected first-quarter economic growth in China. Data showed China’s gross domestic product expanded at an 8.1% pace in the first three months of the year — the slowest rate in nearly three years — and well below most observers’ estimates calling for growth of 8.3%. Reduced optimism about global growth spurred investors to shift cash into safe-haven dollar denominated assets like Treasury debt obligations and agency eligible mortgage-backed securities.
News that the pace of consumer inflation matched expectations here at home contributed a modest amount of support to this mornings’ “flight-to-quality” buying spree in the credit markets. The pace of overall inflation as measured by the Consumer Price Index matched the majority of economists’ projections for an increase of 0.3% last month. The core rate of inflation (a measure that excludes the more volatile food and energy components) posted a modest 0.2% gain in March.
The coming week’s economic calendar will feature the release of the March Retail Sales report on Monday. The balance of the week will be dominated by news from the housing sector with March Housing Starts and Building Permits numbers on Tuesday followed by the March Existing Home Sales data on Thursday. Monday’s Retail Sales report could put a little upward pressure on mortgage interest rates if the headline number shows a sales pace in excess of 0.4% — but the housing numbers will likely serve to limit any threat of significantly higher rates.
Trading action in the stock market will probably exert the strongest influence on the trend trajectory of mortgage interest rates next week. Higher stock prices will likely drag mortgage interest rates higher while lower stock prices will tend to support steady to fractionally lower rates. A retest by the Dow of the low for the year at 12,710 is likely between Monday and Wednesday. If that low holds – the potential for a rally in the stock markets at the expense of fractionally higher mortgage interest rates will ratchet up significantly.
Mortgage Rates as of Friday April 13, 2012 ( purchase transactions )
30 day rate locks, subject to credit score and loan to value edits
30 year fixed 3.75% 0% origination fee
30 year fixed rate 3.875% ( 30 day lock )
15 year fixed rate 3.25%
5/1 ARM 2.875%
7/1 ARM 3.25%