Traffic Jam…

  • January 17, 2014

traffictoonYou know the drive home is going to be bad when it takes you 45 minutes just to get out of the parking lot! Last night the commute in Detroit was brutal…and for no apparent reason. It’s kind of like the bond market. Rates can improve and degrade over the slightest change. This week we sped up, slowed down and at times we seemed to be in gridlock. Let’s breakdown what happened.

  • We opened the week strong; rates continued to improve after a shockingly weak employment report was released last week.  Let’s call it an unexpected accident on the proverbial freeway. Rates improved by almost a full point as investors entertained the idea the FOMC might delay reducing bond purchases in January. Wishful thinking.
  • A strong Retail Sales Report was released on Tuesday, which lifted Q4 growth prospects. This caused a sell off and rates lost all positive momentum. Kind of like when you hit a speed trap.
  • The Federal Bank Presidents also spoke this week, claiming tapering would continue at its current pace and could wind down around October. This means rates could continue to increase as the Fed takes the pedal off the metal to stimulate economic growth.
  • Finally, Housing Starts came in at 999,000 or 9.8% below the prior month estimate. This could be a seasonal phenomenon, however it could indicate growth in the housing market is slowing down. This didn’t impact rates, but all mortgage lenders were watching closely.
  • Despite the stop and go traffic in the bond market this week, the Freddie Mac index shows rates are hitting the lowest level in a month! That is great news for anyone buying a home.

Next week is a holiday-shortened week and it is expected to be uneventful. The first big piece of economic data is released on Thursday with Initial Jobless Claims.

By Lindsey Fediuk, Quicken Loans Capital Markets Analysttraffic001traffic002traffic003

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