Mortgage rates continue descent

U.S. Treasury securities enjoyed another week of rallies. Renewed violence in the Mideast, concerns about domestic security and terrorist attacks, and a continuous string of earnings warnings raised concerns about uncertainty on Wall Street.

Even though the stock markets managed a one-day rally, investors looked toward risk-free U.S. Treasury securities as a safe place to put their money and eventually the stock market gave back its gain and then some. Aggressive buying in Treasuries sent prices up and yields edged down even further. Some mortgage rates dipped along with them.

Treasury yields and mortgage rates hit their lowest levels this year, and are toward November levels, which were the lowest since 1998. The 30-year fixed-rate mortgage (based on zero discount points) fell slightly below 6.5 percent, while the 15-year fixed-rate mortgage edged down to just above 5.875 percent. The introductory rate on the one-year adjustable-rate mortgage is just over 4.75 percent.

Housing Starts and Building Permits for May came in much stronger than expected, a sign that the consumer is still spending. The Consumer Price Index, which monitors inflation at the retail level, was benign, calming fears of inflation, and allaying concerns that the Fed will hike interest rates any time soon.

Investors are watching the dollar, which is at a 17-month low against the Euro. This is beginning to have a negative impact on Treasuries, and the bears will be watching.

As always, the end of the month is loaded with economic indicators that could impact the financial markets. The most influential of these include home sales, durable goods orders, and of course the results of the Fed's two-day meeting. As the quarter draws to a close, there will likely be a wealth of pre-announcements with regard to quarterly earnings. If they continue to disappoint, the result would be continued downward pressure on mortgage rates.

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

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