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Mortgage Market in Review – August 28, 2017

 

Market Comment

Mortgage bond prices finished the week near unchanged which held rates in check.  There were some small spikes higher early in the week.  The Federal Housing Finance Agency (FHFA) index showed housing prices rose 6.5% in the past year.  Weaker data later in the week reversed the small increases.  New home sales printed at 571K versus the expected 610K.  Weekly jobless claims printed at 234K which was near expectations.

Existing home sales printed at 5.44M versus the expected 5.56M.  Global Central Bankers met at Jackson Hole Wyoming to discuss emerging issues and trends.  Fed Chair Yellen was “dovish” in her remarks and reiterated that future Fed action would be “data dependent,” a phrase she has used for over a year.

We ended the week better by approximately 1/8 of a discount point despite some negative movement Monday and Tuesday.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Consumer Confidence Tuesday, Aug. 29,
10:00 am, et
121 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, Aug. 30,
8:30 am, et
182K Important.  An indication of employment.  Weakness may bring lower rates.
Q2 GDP Wednesday, Aug. 30,
8:30 am, et
Up 2.4% Very important.  The aggregate measure of US economic production.  Weakness may lead to lower rates.
Weekly Jobless Claims Thursday, Aug. 31,
8:30 am, et
234K Important.  An indication of employment.   Higher claims may result in lower rates.
Personal Income and Outlays Thursday, Aug. 31,
8:30 am, et
Up 0.1%,
Up 0.1%
Important.  A measure of consumers’ ability to spend.  Weakness may lead to lower mortgage rates.
PCE Core Inflation Thursday, Aug. 31,
8:30 am, et
Up 0.1% Important.  A measure of price increases for all domestic personal consumption.  Weaker figure may help rates improve.
Employment Friday, Sept. 1,
8:30 am, et
4.3%,
Payrolls +200K
Very important.  An increase in unemployment or weakness in payrolls may bring lower rates.
ISM Index Friday, Sept. 1,
10:00 am, et
56.3 Important.  A measure of manufacturer sentiment.  Weakness may lead to lower mortgage rates.
U of Michigan Consumer Sentiment Friday, Sept. 1,
10:00 am, et
97.6 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

QE Unwinding

European Central Bank President Draghi recently praised quantitative easing on both sides of the Atlantic as a huge success.  Critics say that global central bankers created asset bubbles that are primed to pop.  Even former Fed Chair Greenspan said the bond bubble will break.  Some analysts attribute the record gains in stocks directly to these policies.  The Fed bought bonds in an effort to keep rates low.  Investors chasing a favorable return found stocks had a better upside.  The U.S. Federal Reserve hinted at reducing their balance sheet possibly starting in September.  The process will go slowly but will factor into trading.  Remember, their goal is to push inflation (read interest rates) higher.  Now is a great time to take advantage of historically favorable rates.


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