Friday, February 14, 2014

Yellen Testifies

Mortgage Time
Mortgage Market News for the week ending February 14, 2014

Yellen Testifies
The primary influence on mortgage rates this week was new Fed Chair Janet Yellen's semi-annual testimony before Congress. Although there were no significant surprises, maintaining the status quo for Fed policy was taken as good news for stocks and bad news for bonds. Mortgage rates rose during her testimony and ended the week a little higher.
Janet Yellen took over as Fed Chair at the beginning of the month, and Tuesday's testimony before Congress was viewed as the first big opportunity to see her in action. Yellen made it clear that she would continue the policies seen under her predecessor, Ben Bernanke, with little change. She said that recent weak data and turmoil in emerging markets did not alter the Fed's long-term economic outlook. Her upbeat assessment of the economy lifted stocks, but was negative for mortgage rates. Also hurting rates, she stated that the Fed will continue scaling back its bond purchase program at a steady pace, unless the performance of the economy worsens significantly. The Fed's bond purchases have increased the demand for mortgage-backed securities (MBS), which has helped keep mortgage rates low.
The economic data released this week continued the recent trend of falling short of expectations. The reaction was limited, however, because investors are uncertain to what degree the results reflect unusually bad winter weather rather than an underlying weakening of the economy. Both Retail Sales and Industrial Production revealed small declines in January. This follows shortfalls in the Employment and ISM Manufacturing reports last week. Estimates for first quarter GDP have been revised lower by most economists, and the consensus is now for 2.0% growth. The economy is expected to return to a 3.0% growth rate in the second quarter.

Davis Orebaugh
Mortgage Consultant
NMLS #:   / NC 323545
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2501 Blue Ridge Road, Suite 370
Raleigh, NC 27607
Phone:  919.926.7554 Cell:  919.740.7049 Direct Fax:  919.590.1767     /