Despite stronger than expected economic data, the financial situation in Greece held the greatest influence on mortgage rates this week. A flight to quality and prospects of slower economic growth in Europe were favorable for mortgage markets and negative for the stock market, and Austin mortgage rates ended the week lower.

Global financial markets remained focused on the economic troubles of Greece. Greek workers responded to proposed austerity measures with strikes and riots, and investors grew increasingly concerned that other smaller European countries will face similar problems cutting their budget deficits. As a result, US mortgage markets were helped in two primary ways. First, in response to the uncertainty in Europe, investors shifted funds to safer investments, including US Treasuries and mortgage-backed securities (MBS). Second, investors expect that continued economic turmoil in Europe will reduce US exports to the region, slowing US economic growth and reducing inflationary pressures. Increased demand for MBS and lower future inflation are both positive for mortgage markets.

The April Employment report exceeded expectations in nearly every area. Against a consensus forecast of 190K, the economy added 290K jobs in April, the most since March 2006, and the data from prior months was revised higher by an additional 121K. The April figures include 66K temporary census employees hired by the government, but this was fewer than expected. The manufacturing sector added the most jobs since 1998. The Unemployment Rate rose to 9.9% from 9.7%, but that was due to unexpectedly large growth in the labor force as more people began to seek jobs.