Illinois Mortgage Rate Update for May 30th,2013
Yesterday mortgages and treasuries enjoyed a solid midday rally. Maybe it was a decent 5 year auction or friendly comments from Fed official Rosengren; but whatever the cause… the respite from May’s tremendous sell off was appreciated. The soft economic numbers also helped the case for the bonds.
The number of Americans filing for unemployment benefits rose and an initial estimate of first-quarter economic growth was revised slightly lower. The number of Americans seeking unemployment aid rose last week, a sign layoffs have increased, the Labor Department said Thursday. Claims for unemployment aid rose 10,000 last week to 354,000. The government also lowered its estimate for U.S. economic growth in the first three months of the year to 2.4 percent from 2.5 percent . Both of these numbers were lower than the expected results .. That suggests the U.S. economy may still need some time to recover from its funk and that the Fed will keep up its $85 billion in monthly bond purchases.
After reaching 1.626 percent on May 2nd, the yield on the 10-year Treasury bond increased to over 2.20 percent in early trading on May 29th. That might not seem like a lot, but it is significant in the bond world. The ten-year Treasury is the base rate upon which many loans—and especially mortgage loans—are established. A recovery in the housing market has been crucial to the U.S. economic recovery, and artificially low interest rates have fueled this recovery. A significant rise in mortgage rates would thwart further benefits and may indeed create a problematic headwind. Therefore, the Federal Reserve has been obsessed with keeping these rates low.