Thursday, June 16, 2016 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 -
Mortgage rates moved lower today, but it was not because of what happened today but to catch up on what transpired yesterday. Today after what started to look like record low days were approaching, right after my report this morning when I reported the 10yr had gotten to 1.52% that turned out to be the low for the day as it closed today at 1.58. The stock indexes though opened lower but crawled back and ended better. The data this morning had little effect on markets with the UK vote coming and that is all markets are concerned with now. Every day now we expect market volatility to increase across all financial markets and commodity prices - today the DJIA had a 180 point range.
Tomorrow the only data, May housing starts and permits, and if it comes in as predicted, this could be another report that shows the weakening of the economy.
Speaking of the UK, a vote to leave the EU is likely to set off turmoil that trumps the 2008 financial crisis. Not initially but possibly by the end of the year. In the meantime a leave vote will keep US interest rates low and in a very volatile pattern. The EU is in trouble even if the vote in the UK is to stay. The Brit's issues are the tip of the big ice cube, like the cube most of it is under the radar. All central banks are extremely concerned and go a long way to avoid any discussions on the subject. Consider that there has been very little comments from world leaders, the IMF, the World Bank, and the Fed (other than a few sentences yesterday in the policy statement). Leaders of other EU members have been relatively quiet except for France, no one wants to add to the angst.
In summary, treasury yields continued their downward march today, and mortgage rates hopped on for the ride. We are now approaching the lowest rates in several years. EU turmoil and the Fed's benign view on inflation seem destined to keep rates down for some time. Right now the trend is our friend, but one should still check what they feel is their risk versus reward, as today's rates are very attractive.
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