Mortgage rates improved last week, marking the first time since mid-May that has happened. The rate drop is the result of how mortgage markets interpreted the Federal Reserve's Wednesday press release.
In it, the Fed said:
- Inflation pressures should lessen soon
- Growth should remain steady this year
- The credit market is currently fragile
Separately, none of this was news to the markets. But, considering all three statements together, investors grew nervous of leaving money in the stock market -- specifically in financials.
Post-Fed announcement, there was a wave of selling that dropped the Dow Jones Industrial Average nearly 20 percent from its October 2007 high.
As stocks sold off, though, mortgage shoppers were benefiting.
Rates ticked down in the Fed announcement's wake because the mortgage bond market acted as a "safe haven" for traders. More demand for mortgage-backed bonds caused rates to fall, accented by a favorable run very late in the day Friday.
This week, the momentum may continue, or it may not. There is a lot to capture traders' attention in this holiday-shortened, four-day work week.
The biggest data release of the week will, undoubtedly, be Thursday's Unemployment Report, but there are also two Fed speakers stumping, as well as Treasury Secretary Paulson speaking about the economy.
As the week goes on, more and more traders will be leaving for the long weekend so expect rates to move with greater force as Thursday afternoon gets nearer. And, if stocks haven't regained favor with investors by then, expect that mortgage rates will have a good week.
