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By G. Steven Bray
The same forces that have existed for months are pulling on mortgage rates – among them, the German bond market, US economic data, the Greek debt soap opera, and Fed rate hike fears – which has resulted in volatility and unpredictability. Recently, German bonds seem to have held the most sway. Even on days when the other forces push down, German bonds seem to be able to drag US rates the other way. Really, I don’t see that changing, but a couple upcoming events at least have a chance.
Greece has a debt payment due next week, and it seems they really don’t have the money this time. I’d say odds are that the European Union will figure out some way to rescue them again, but if it doesn’t, Greece would default. The effect probably won’t be catastrophic as it won’t be a big surprise, but it should put some downward pressure on rates.
Next week also is a jobs report week. The last report was back on trend of a little more than 200k jobs, but, unfortunately, average earnings also returned to trend showing little income growth for US workers. As I’ve said previously, I think earnings growth is more important than job growth at this point. The addition of low-paying service jobs makes for weak economic growth and little pressure on interest rates.