What's going on with Mortgage Rates? Are the dropping?

Global Concerns Benefit Rates Over the last few days, investors shifted assets from stocks to bonds, which was positive for mortgage rates. The major reasons included geopolitical tensions, concerns about growth in China and weaker than expected U.S. economic data. Mortgage rates moved lower. A couple of events caused investors around the world to shift to safer assets over the past few days. On Monday, Saudi Arabia cut diplomatic ties with Iran, raising tensions between these two major powers in the Middle East. On Wednesday, North Korea announced that it had successfully tested a hydrogen bomb. When concerns about global instability increase, investors generally reduce the risk in their portfolios. One method to accomplish this is to sell stocks and buy bonds, including U.S. mortgage-backed securities (MBS). The increased demand for MBS causes mortgage rates to decline. Weaker than expected economic data in China released on Monday also was positive for mortgage rates. Manufacturing, which has been a key factor in China's expansion in recent years, has weakened more quickly than expected, and investors are worried that China's economy may be performing worse than the official numbers suggest. Recent manufacturing data in the U.S. also revealed larger than expected declines. The ISM national manufacturing index fell to the lowest level since June 2009. A slowdown in global economic activity has hurt the sector. In addition, the stronger value of the U.S. dollar makes U.S. goods more expensive in other countries. 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. Additional labor market data closely watched by the Fed, the JOLTS report, will come out on January 12. JOLTS measures job openings and labor turnover rates. Investors also will be watching for signs of escalation concerning the Middle East or North Korea.  Commentary provided by MBSQuoteline. For live MBS pricing visit www.mbsquoteline.com.