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Mortgage Market in Review – April 30, 2018

   

Market Comment

Mortgage bond prices finished the week lower which put upward pressure on rates. We started with sharply higher rates as data showed economic strength. New home sales were 694K versus the expected 631K. Consumer confidence was 128.7. Analysts looked for a reading of 126. The 10Y hit the key psychological 3% mark for the first time since January 2014. Weekly jobless claims were 209K which was the lowest reading since 1969. Durable goods orders rose 2.6% versus the expected 2.3% increase. However, ex-auto orders were unchanged versus an expected 0.7% increase. Q1 Gross Domestic Product rose 2.3% versus the expected 2.1% increase. Employment cost index rose 0.8% which was 0.1% higher than expected. We ended the week worse by 1/8 to 1/4 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Personal Income and Outlays Monday, April 30,
8:30 am, et
Up 0.4%,
Up 0.1%
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
PCE Core Inflation Monday, April 30,
8:30 am, et
Up 0.2% Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.
ISM Index Tuesday, May 1,
10:00 am, et
59.6 Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, May 2,
8:30 am, et
242K Important. An indication of employment. Weakness may bring lower rates.
Fed Meeting Adjourns Wednesday, May 2,
2:15 pm, et
No rate changes Important. Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting.
Preliminary Q1 Productivity Thursday, May 3,
8:30 am, et
Up 0.8% Important. A measure of output per hour. Improvement may lead to lower mortgage rates.
Trade Data Thursday, May 3,
8:30 am, et
$58B deficit Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
Weekly Jobless Claims Thursday, May 3,
8:30 am, et
208K Important. An indication of employment. Higher claims may result in lower rates.
Factory Orders Thursday, May 3,
10:00 am, et
Up 0.9% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Employment Friday, May 4,
8:30 am, et
4.1%,
Payrolls +120K
Very important. An increase in unemployment or weakness in payrolls may bring lower rates.

Jobs

Keep a sharp eye on the various employment related data this week. Last week’s weekly jobless claims hit levels not seen in over 40 years. The data showed 209,000 new applications for unemployment. Analysts expected a number around 230,000. It is not uncommon for the weekly figures to miss estimates but the sharply lower figure was a very strong indicator that the U.S. economy continued to add jobs. The Fed is clear on their course to raise rates. Strong employment data supports the call for rate hikes sooner rather than later.


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