Can you say improving job market? Initial Jobless Claims have now fallen below 400,000 – this level is associated with an improving job market – for five out of the last six weeks.
Not only was last week’s Initial Jobless Claims reading of 366,000 the lowest level since May of 2008, there was a double dose of good news in the manufacturing sector, as both the Philadelphia Fed Index & the Empire State Index were both well above expectations. Normally, good economic news causes money to move out of Bonds and into Stocks as investors like to take advantage of gains…and this would typically hurt Raleigh Home Loan Rates, as they are tied to Mortgage Bonds.
However, the continued uncertainty out of Europe helped keep Bonds andRaleigh Home Loan Rates on an improving trend, as the US Dollar and US Bonds (including Mortgage Bonds, which Raleigh Mortgage Rates are based on) are benefiting from safe haven buying. Ultimately, Europe needs to provide a large financial backstop for their banks and sovereign debt in order to fix their problems longer-term. Until this happens, I believe uncertainty should benefit the Dollar & our Bonds & keep Raleigh Mortgage Rates relatively low.
One factor that we can’t ignore, though, is inflation. Despite the Fed stating again last week that inflation is moderating, core consumer level inflation has continued to inch higher every month. Also, last week’s Producer Price Index showed that inflation at the wholesale level was slightly higher in November.
Remember, inflation is the nemesis of Bonds and Raleigh Home Loan Rates, because if inflation rises, investors in Bonds demand a higher yield to offset the lost buying power inflation imposes on a fixed payment. And as Raleigh Home Loan Rates are tied to Mortgage Bonds, this would mean Raleigh Home Loan Rates move higher.
The bottom line is that while the uncertainty out of Europe should continue to help Bonds and home loan rates, both inflation and continued good economic reports here in the US could temper these improvements. With Raleigh Home Loan Rates still near historic lows, now remains a great time to purchase or refinance a home. Let me know if I can answer any questions at all for you — just give a call to my SunTrust Mortgage Raleigh Office @ 919.858.0023.
The Bond Markets will be closing early at 2:00 p.m. on Friday for the Christmas holiday, but the week will be busy before then.
• Housing Starts and Building Permits (Tuesday), Existing Home Sales (Wednesday) and New Home Sales (Friday) for November will be reported.
• Weekly Initial Jobless Claims will be delivered on Thursday, and the Markets will be looking to see if the reading remains under 400,000.
• Also on Thursday, we’ll see the Consumer Sentiment Index for December as well as the final reading on Third Quarter Gross Domestic Product (GDP) for 2011. The second reading came in at 2%, down from the first reading of 2.5%.
• Finally, Friday the markets will see reports on Personal Income and Personal Spending along with the inflation indicator Core Personal Consumption Expenditure (PCE). Durable Goods will also be reported.
Finally, the Treasury Department will sell a whopping $99 Billion in 2-, 5- and 7-year Notes on Monday, Tuesday, and Wednesday.
Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and Raleigh Home Loan Ratesimprove, while strong economic news normally has the opposite result.
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