Bond traders were worried that personal consumption expenditures (PCE) would creep up, signaling that inflation was trending toward the Fed’s 2% goal and that the agency would raise interest rates earlier than planned. But that’s not what happened.
“The last reading for the core PCE was 1.8. Traders were cautiously looking if that would creep over 2, but it went the other way. It went to 1.6,” said Bryan McNee, vice president and senior bond analyst for MBSAuthority.com. “Mortgage-backed securities improved, which means mortgage rates improved slightly. As of right now, it’s just kind of moving us sideways. It didn’t really change long-bond traders’ minds about when they think the Fed will tighten.
“We have a couple of different reports pointing in different directions,” he said. “We’re not seeing a sell-off which would cause interest rates to spike, and we’re not seeing a rally which would cause interest rates to improve. The overall theme is that things are a little better in interest rate world, but on a week-to-week basis, we’re still a little worse than we were. Nothing terribly exciting, which is good for consumers.”
Well, it looks like today’s release of economic numbers won’t have a huge effect on mortgage rates.