The major economic news was favorable for mortgage markets this week. Investors grew more concerned that the spread of Covid variants could slow global growth, portfolio rebalancing at the start of the third quarter increased the demand for bonds, and the economic data was a bit weaker than expected. As a result, mortgage rates ended the week lower.
The most significant economic report released this week was the national service sector index from the Institute of Supply Management (ISM). This index fell to 60.1, below the consensus forecast of 63.5, but still a very high level by historical standards. Readings above 50 indicate that the service sector of the economy is expanding. Many companies continue to experience difficulties in hiring enough workers to keep up with their growth.
The minutes from the June 16 Fed meeting released on Wednesday revealed that officials generally did not believe that enough progress had been made toward their employment and inflation goals to begin to tighten monetary policy. The minutes also noted that the Fed intends to “provide notice well in advance” of an announcement to reduce bond purchases. Officials were divided about whether they should scale back mortgage-backed securities (MBS) and Treasuries in equal proportions or reduce MBS by a greater amount.
Looking ahead, investors will closely watch Covid case counts around the world. They also will look for hints from Fed officials about the timing for changes in monetary policy. Beyond that, the Consumer Price Index (CPI) will come out on Tuesday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. Retail Sales will be released on Friday. Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key indicator of growth.
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Raleigh Mortgage Group, Inc.
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