Overview: Over the past week, North Korea and Hurricane Irma were the main influences on mortgage rates. At Thursday's meeting, the European Central Bank (ECB) made no policy changes, so there was little impact. Mortgage rates ended slightly higher but still remained near the best levels of the year.
In recent weeks, investors have reacted to a series of escalating missile tests by North Korea by shifting from riskier assets, such as stocks, to relatively safer assets, including U.S. mortgage-backed securities (MBS). The added demand for MBS caused mortgage rates to decline. This weekend marked the 69th anniversary of the formation of the current North Korean government, and many investors were concerned that another missile test would highlight the occasion. Instead, the government threw a party. As a result, investors shifted back to riskier assets, causing mortgage rates to rise.
Before it made landfall, the projected destruction that was expected to be caused by Hurricane Irma in the U.S. was staggering. While the actual damage was enormous, it was not quite as bad as had been feared. This caused investors to shift back to stocks and away from bonds.
Every Thursday, the Labor Department releases a report on the number of new jobless claims that were filed. For the last couple of months, this figure has held remarkably steady at levels near 240,000. This week, however, claims jumped to 298,000. This was the highest level since April 2015. It was also the largest weekly increase since 2012. There was little doubt that the surge in claims was due to the effects of Hurricane Harvey. Hurricane Irma is likely to have a similar effect.
Looking ahead, the next Fed meeting will take place on September 20. Investors expect the Fed to announce a plan to begin to reduce the size of its enormous holdings of Treasury and mortgage-backed securities. Before that, the Consumer Price Index (CPI) will come out on Thursday, and the Retail Sales report will be released on Friday. In addition, the Housing Starts report will come out on September 19, followed by Existing Home Sales on September 20..