04/19/2024
Good read from our capital markets team:
Markets were reacting early Friday after Israel struck back at Iran, heightening tension in the Middle East. Israel aimed attacks at sites in central Iran where there is a drone factory, The Wall Street Journal reported, citing people familiar with the matter. While there haven’t been any public statements providing official confirmation, CNN reported that unnamed U.S. officials acknowledged the incident. The 10yr Treasury dipped in the overnight session to 4.49%. Oil prices spiked above $90 a barrel first thing before pulling back. Gold futures were little changed early Friday at $2397.10 which suggests traders aren’t turning to the yellow metal as a safe haven amid the deepening tensions. Much remained unclear about the extent or the impact of the Israeli action. It added that the direct exchange of blows risks taking the conflict that began with militant group Hamas’s Oct. 7 attack on Israel to a dangerous new level. The worry is that it could embroil the U.S. and Gulf states in a regional conflagration that they have worked hard to prevent.
Just as the spring housing market was starting to look promising, the winds changed. Mortgage rates have started climbing again for the first time this year, while sales of previously owned homes dropped more than expected in March from the previous month, and average home prices are still rising. The average 30-year fixed mortgage rate jumped to 7.10% from last week’s 6.88% and was the highest rate since late November, Freddie Mac said. Mortgage News Daily’s 30-year fixed rate gained roughly half a percentage point from the end of March to 7.41%. Existing home sales fell 4.3% to a seasonally adjusted annual rate of 4.19 million, well below the long-term average of five million amid low inventory. Houses linger on the market for 33 days, up from 29 in March 2023. Even though housing inventory rose 4.7% from February to March, the median home price rose 4.8% from last year to $393,500. Higher prices and mortgage rates pushed buyers’ median monthly payment to a new high of $2,775 on April 14.
More Federal Reserve officials are delivering the message that there’s no rush to move on interest rates, joining those who don’t see a rate cut until later this year. New York Fed President John Williams and Atlanta Fed President Raphael Bostic indicated they were comfortable being patient. Williams said during a conference sponsored by Semafor that the current rate is at a good place and he doesn’t feel the urgency, especially as inflation continues to run higher than their target 2% rate. He added that policy is “doing exactly what we’d like to see.” Recent economic data have shown a strong labor market, economic growth, and better-than-expected consumer spending. Inflation will return to 2%, Bostic said in Florida on Thursday, but he isn’t in a “mad dash” to get there. He suggested a cut could come closer to the end of the year.
Bond pricing is improved in early trading as treasury yields inch lower on little economic news. The U.S. 10 Year Treasury is currently 4.61%, slightly below the open at 4.63%. Treasury yields are moving lower this morning on the news. Mortgage rates will likely print better this morning all else constant.
