The service sector witnesses fantastic expansion while mortgage rates go down. Weekly economic news came out favorable for mortgage markets.
Investors worry about the spreading COVID-19 slowing global growth. Also, the start of the third quarter contained talks of portfolio rebalancing. As a result, the portfolio rebalancing increased bond demand.
Overall, economic data appeared a bit weaker than expected. Ultimately, mortgage rates ended the week lower.
Service Sector Witnesses Fantastic Expansion
First, we discuss the most significant economic report released this week. Continually, the service sector witnesses fantastic expansion. The Institute of Supply Management’s (ISM) national service sector index indicated as much.
This national service sector index fell to 60.1. This result dropped well below the consensus forecast of 63.5. However, the national service sector index still maintains a very high level by historical standards.
Readings above 50 indicate that the economy is expanding. Many companies continue to experience difficulties in hiring enough workers. This problem makes it difficult to keep up with growth.
Divided Strategies for Mortgage-Backed Securities
While the service sector witnesses fantastic expansion, Fed officials do not believe that it is time to tighten monetary policy. Analysts drew this conclusion from the June 16th Fed meeting. Overall, Fed officials feel that they haven’t made enough progress toward their employment and inflation goals.
The minutes also noted that the Fed intends to “provide notice well in advance” of an announcement to reduce bond purchases. Officials felt divided on their strategies for mortgage-backed securities. On one hand, Fed officials debated whether they should scale back mortgage-backed securities (MBS) and Treasuries in equal proportions. On the other hand, some felt that the Fed should reduce MBS by a greater amount.
Looking Ahead After the Service Sector Witnesses Fantastic Expansion
Looking ahead after the service sector witnesses fantastic expansion, investors closely monitor global COVID-19 case counts. In addition, investors look for hints from Fed officials about the timing for changes in monetary policy.
Beyond that, the Consumer Price Index (CPI) comes out on Tuesday. Analysts widely follow the monthly CPI inflation report. It examines the price change for goods and services.
Later in the week, Retail Sales releases on Friday. Consumer spending accounts for over two-thirds of U.S. economic activity. Because of this the retail sales data indicates growth
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