Prices of short-term Treasuries dropped earlier this month, pushing two-year note yields to the highest since September, after a report showing continued jobs-market strength boosted bets the Federal Reserve may consider raising interest rates sooner than forecast.
The number of mortgage applications fell to the lowest level in nearly two decades, the Mortgage Bankers Association (MBA) said recently. The Market Composite Index, a measure of mortgage loan application volume, decreased 160 percent on a seasonally adjusted basis from one year earlier. The purchase index decreased 35 percent over the same period to its lowest level since 1995.
After accelerating at the end of last year, the economy slowed in the first quarter of 2014, weakened by severe weather. Reported economic growth in the second half of 2013 was relatively strong, though temporary factors, including surges in inventories and exports, were significant drivers. Inventory investment contributed to almost half of GDP growth during that period, and economists are looking for weaker numbers in the near term as businesses work off the excess inventory.
Over the past five years, financial institutions have operated in a setting of historically low interest rates. These conditions have influenced changes in asset mix while presenting challenges to maintaining profitability.
