Mortgage rates declined for the second week in a row.
Investors are pricing in more risk of economic slowdown and a potential recession, which may slow the pace of future interest rate hikes at the Federal Reserve. Economic indicators released last week pointed to slower growth in consumer spending and manufacturing in the first quarter and prior month, with results below market expectations. This furthered the recession risks being priced in markets. Equity markets declined and bond markets rallied, driving the U.S. 10-year Treasury yield below 3% for the first time since early June. Lower rates have not led to an uptick in mortgage activity, however, as the Mortgage Bankers Association reported mortgage applications were down last week. Purchase activity is slowing down as shoppers contend with both scant home inventory and affordability challenges from rising rates and home prices.
Investors will be focused on the Federal Open Market Committee (FOMC) minutes and speakers for any further hints on Fed actions to tame inflation, along with jobs and employment data releases later in the week.