Growing political uncertainty was good for mortgage rates this week. Recent economic data had little impact. Mortgage rates ended the week near the best levels since before the November Presidential election.
Following the election of Donald Trump, the stock market rallied and mortgage rates rose. They did so based on pro-growth policy changes planned by President Trump. On Wednesday, allegations of Trump's interference in an FBI investigation gave investors reason to question the President's ability to implement these changes. Investors reacted to the resulting political uncertainty by selling stocks and buying bonds, including mortgage-backed securities (MBS). This added demand for MBS was good for mortgage rates.
Tuesday's report on housing starts contained mixed news. Overall housing starts in April declined 3% from March, which was well below the expected levels. However, this was due to weakness in the volatile multi-family segment. Single-family housing starts increased slightly in April. Also, Monday's NAHB housing index showed that home builder confidence surprised to the upside in May and remains at very high levels.
Looking ahead, political news may continue to influence mortgage rates. Beyond that, New Home Sales will be released on Tuesday and Existing Home Sales on Wednesday. The second estimate of first quarter GDP and Durable Orders will come out on Friday. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.
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