Weekly Economic Update – 10.3.17

Additional threats from North Korea were positive for mortgage rates early in the week.  However, the announcement of a tax reform plan on Wednesday was negative so the two events were roughly offsetting, and mortgage rates ended the week just slightly higher.

On Monday, North Korean officials said that they interpreted recent comments made by President Trump as a declaration of war.  Investors reacted to this by shifting to relatively safer assets, including mortgage-backed securities (MBS).  The increased demand for MBS caused mortgage rates to decline.

The volatility seen last week continued on Wednesday, but the movement was in the opposite direction from Monday.  It took place after President Trump released additional details about his proposed tax reform plan.  If passed, this plan is expected to boost economic growth and to increase the budget deficit.  Faster economic growth raises the outlook for future inflation, which is negative for mortgage rates.  A larger deficit increases the supply of bonds, which also is bad for mortgage rates.

Looking ahead, the important monthly Employment report will be released on Friday.  As usual, this data on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month (and can be the biggest “rate mover”).

Please reach out with any questions in regards to this, and let us know if there is anything we can do for you and your valued clients.

Thank you for your continued support, have a productive week.

Stuart Crawford
SVP, Regional Manager
V.I.P. Mortgage, Inc.

AZ: LO0911271
NM: 156166