Rates weather upbeat economic news

Mortgage rates held steady despite some decidedly upbeat economic news, which often spurs selling in the U.S. Treasury markets.

This week, however, a bout of selling was followed by a round of buying. This allowed yields to edge back down again.

The 30-year fixed-rate mortgage (based on zero discount points) is holding at 6.125 percent, while the 15-year fixed-rate mortgage moved just above 5. 5 percent. The introductory rate on the one-year adjustable-rate mortgage remained at 4.125 percent.

Refinancing continues to suffer, even though mortgage rates have remained steady over the past few weeks. According to the Mortgage Bankers Association, refis fell 13 percent for the week ended Aug. 22, and now account for less than half of all mortgage applications. Homes purchases are faring much better, dropping by just 3.6 percent.

Low volumes due to vacationers in the waning days of August added to volatility, as one big buy or sale could impact the markets. Traders, however, are always on the lookout for signs of economic recovery that could lead to inflation and the possibility of a Fed rate hike.

Despite the spike in mortgage rates this summer, home sales remain strong. Existing home sales for July blew past estimates, rising 5 percent to a record annual rate of 6.12 million units. And while new home sales fell to a still healthy 1.6 million units, they beat expectations.

Although the first week of September is shortened due to Labor Day, there is an abundance of news scheduled for release including ISM data on the manufacturing and non-manufacturing sectors, factory orders, construction spending and the big one -- the employment report for August. The ISM indices and employment numbers will wield the most influence.

Expansion in manufacturing and an improved employment situation would likely spur selling in Treasuries, which would raise interest rates.

Bill Steele is financial editor of Interest.com -- a national publisher of mortgage rates and information.

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