Yesterday, treasuries and mortgages rallied as the Fed remains prepared to act as needed to aid economic growth. Bernanke used the term, “unusually uncertain” to describe the economic outlook. Traditionally, the FOMC would cut rates but with the Fed Funds rate at or near zero, he outlined how they could lower the amount interest paid on bank reserves, pushing money back into the economy via banks. Mortgages are selling off this morning on better than expected home sales data (-9.9% was expected, -5.1% was actual).
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Last week, the number of Americans applying for mortgages increased 19.5% when compared to the week prior, according to a report released today by the Mortgage Bankers Association (MBA). The study showed refinance applications rose 8.6 percent, and applications from those seeking to purchase a home increased 15.3 percent.
The market is relatively flat this morning ahead of Bernanke’s testimony to the Senate Banking Committee today. It is expected that Bernanke will be reiterating that rates will remain low for a while. In terms of economic releases, MBA’s mortgage application index came in higher at 7.6%, being that record low rates have boosted refinancing.
Housing starts came in lower than expected, adding to the speculation that economic growth is slowing. Home builders have begun adjusting their building plans after existing home sales fell 30% in May because of the expiration of the federal home buyer tax credits.
Treasuries are relatively unchanged this morning arfter Friday’s rally following the low reading on the consumer confidence report. Today, we have the NAHB housing market index at 10 a.m. EST which measures the general state of the single family home building market. It is expected to drop to 16. A reading can come in between 0 to 100, and below 50 indicates a poor builder outlook.
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According to RealtyTrac”s Midyear Report, the US housing market experienced a total of 1,961,894 foreclosures filings so far this year, a potential threat to the market’s “fragile stability.”
Yesterday’s release of the FOMC minutes showed a cautious Fed with a downward revision to 2010 growth. Most investors had already speculated that the Fed would remain accomodative over concerns that the economic recovery is slowing. Initial claims continue to show no real signls if improvement. The continuing claims fell, but it is widely believed that the decline in the number of people receiving benefits is due more to people running out of benefits than a surge in hiring.