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Your Weekly Review Begins Here:

The stock market recorded a modest advance for the week and got off to a good start last Monday when it was announced U.S. and Mexico had reached an agreement on immigration practices to avoid the levying of a 5% tariff rate on all goods imported from Mexico by the U.S. However, stocks cooled off as the week progressed as uncertainty weighed on investors concerning what may transpire during the Federal Reserve’s monetary policy meeting this coming Wednesday and the G-20 summit scheduled for June 28-29 in Osaka, Japan. The G-20 is an international forum for the governments and central bank governors of 19 countries plus the European Union having the largest global economic impact, and whose purpose is to discuss policy pertaining to the promotion of international financial stability.

Expectations circulated that President Donald Trump and Chinese President Xi Jinping may meet during the summit to improve upon trade relations, but President Trump downplayed these expectations on Friday saying “it doesn’t matter” if Xi Jinping attends. Trump commented “If he shows up, good, if he doesn’t…in the meantime, we’re taking in billions of dollars a month (in tariffs) from China.” There are also expectations the Fed will cut short-term interest rates and as of Sunday, the fed funds futures market was showing an 87.5% implied probability of a rate cut at the Fed’s July 31 FOMC meeting.

Supporting the prospects for a rate cut, the Consumer Price Index only increased 0.1% in May and was down from a 0.3% increase in April. This weaker than anticipated inflation data helped send Treasury yields lower, with the yield on the 10-year Treasury note falling to 2.086% during Friday trading. Treasuries also benefited from building geopolitical tensions in the Middle East as Iran was accused of attacking a pair of oil tankers near the Strait of Hormuz which prompted investors to switch into safe-haven assets.

In Housing last Tuesday, CoreLogic released its Loan Performance Insights Report showing the

U.S. had its lowest foreclosure rate for the month of March in at least 20 years. Also, the overall and serious delinquency rates for a March came in at 13-year lows.

Nationally, 4% of mortgages in March were in some phase of delinquency defined as 30 days or more past due, including those in foreclosure. This was a 0.3-percentage-point decline in the overall delinquency rate compared with March 2018, when it was 4.3%.

The early-stage delinquencies rate (defined as 30 to 59 days past due) was 2% in March 2019 compared to 1.8% in March 2018. The share of mortgages 60 to 89 days past due in March 2019 was 0.6%, unchanged from March 2018. The serious delinquency rate (defined as 90 days or more past due, including loans in foreclosure) was 1.4% in March 2019, down from 1.9% in March 2018. The serious delinquency rate of 1.4% this March was the lowest for a March since 2006 when it was also 1.4%. Frank Martell, president and CEO of CoreLogic, remarked “Delinquency rates and foreclosures continue to drop through March and should decline further in the months ahead barring any serious dislocations from recent flooding in the Mid-West or a severe Atlantic hurricane and/or wildfire season on the coasts.”

Elsewhere, mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications significantly increased from the prior week. The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 26.8% for the week ended June 7, 2019. The seasonally adjusted Purchase Index increased 10% from a week prior while the Refinance Index increased 47%. Overall, the refinance portion of mortgage activity increased to 49.8% from 42.2% of total applications from the prior week.

The adjustable-rate mortgage share of activity increased to 7.9% of total applications from 7.1%. According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance dropped to 4.12% from 4.23% with points remaining unchanged at 0.33 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 3.5% coupon bond dropped 26.6 basis points to close at $101.922 while the 10-year Treasury yield increased 0.20 of one basis point to end at 2.086%. The Dow Jones Industrial Average gained 105.67 points to close at 26,089.61. The NASDAQ Composite Index added 54.56 points to close at 7,796.66. The S&P 500 Index advanced 13.64 points to close at 2,886.98. Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 11.84%, the NASDAQ Composite Index has gained 15.16%, and the S&P 500 Index has advanced 17.50%.

This past week, the national average 30-year mortgage rate rose to 3.92% from 3.86%; the 15-year mortgage rate increased to 3.71% from 3.68%; the 5/1 ARM mortgage rate remained unchanged at 3.85%; and the FHA 30-year rate climbed to 3.71% from 3.62%. Jumbo 30-year rates increased to 3.91% from 3.90%.

Economic Calendar – for the Week of June 17, 2019

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Date	Time ET	Event /Report /Statistic	For	Market Expects	Prior
Jun 17	08:30	New York Empire State Manufacturing Index	Jun	NA	10.1
Jun 17	10:00	NAHB Housing Market Index	Jun	66	66
Jun 17	16:00	Net Long-Term TIC Flows	Apr	NA	$51.9B
Jun 18	08:30	Building Permits	May	1,295K	1,269K
Jun 18	08:30	Housing Starts	May	1,240K	1,139K
Jun 19	07:00	MBA Mortgage Index	06/15	NA	26.8%
Jun 19	10:30	EIA Crude Oil Inventories	06/15	NA	+2.2M
Jun 19	14:00	FOMC Interest Rate Decision	Jun	2.375%	2.375%
Jun 20	08:30	Initial Jobless Claims	06/15	220,000	222,000
Jun 20	08:30	Continuing Jobless Claims	06/08	NA	1,695K
Jun 20	08:30	Current Account Balance	Q1	-$125.0B	-$134.4B
Jun 20	08:30	Philadelphia Fed Manufacturing Index	Jun	11.5	8.5
Jun 20	10:00	Index of Leading Economic Indicators	May	0.1%	0.4%
Jun 21	10:00	Existing Home Sales	May	5.30M	5.19M

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

The FNMA 30-year 3.5% coupon bond ($101.922 -26.6 bp) traded within a narrower 28.1 basis point range between a weekly intraday low of $101.844 on Tuesday and a weekly intraday high of 102.125 on Monday before closing the week at $101.922 on Friday. Mortgage bonds traded lower on Monday and Tuesday and attempted to recover the remainder of the week before slipping lower on Friday. Same as the pattern last week, there was a weak sell signal generated on Tuesday followed by a weak buy signal on Friday. The slow stochastic indicator shows the bond is just below the “overbought” level and with the weak buy signal on Friday, we will likely see the bond trade in a sideways direction between closest support and resistance levels. As a result, there should be little movement in mortgage rates in either direction this coming week.