|Focus on Europe|
|It was another volatile week for mortgage markets. Uncertainty about the outcome of the elections in Europe had a positive influence on U.S. mortgage rates. The Fed minutes and the economic data had little net effect. As a result, mortgage rates ended the week lower.|
|One source of volatility is uncertainty about the outcome of upcoming elections in several European countries. Investors are most focused on the presidential election in France which will take place on April 23. Polls show a close race between Marine Le Pen and Emmanuel Macron. Le Pen’s campaign has been centered on plans for France to leave the EU and to stop using the euro currency, while the centrist Macron has run on a more traditional platform. It is not clear what would happen to the EU if France decided to exit. As a result, investors have reacted by shifting to safer assets after news which favors a Le Pen victory and doing the opposite after positive news for Macron. Since U.S. mortgage-backed securities (MBS) are viewed as relatively safer assets, they have been affected by the shifts in sentiment, causing volatility. The net effect on mortgage rates for the week was positive.|
|The Fed was another source of volatility this week. On Wednesday, the Fed released the minutes from the February 1 Fed meeting. Concerned that the Fed might talk about a need to reduce its holdings of MBS, investors pushed mortgage rates a little higher ahead of the release of the minutes. When the minutes made little mention of this topic, investors later reversed their positions, resulting in little net change.|
|Looking ahead, Pending Home Sales and Durable Orders will come out on Monday. The Core PCE price index, the inflation indicator favored by the Fed, will be released on Wednesday. The ISM national manufacturing index also will come out on Wednesday, and the ISM national services index will be released on Friday. Fed Chair Yellen is scheduled to speak on Friday as well. The next Employment report will come out on March 10 (due to February being a shorter month).|
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