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Mortgage Market in Review – April 4, 2016

Market Comment

Mortgage bond prices finished the week higher which put downward pressure on rates. Rates were higher Monday but started to turn the other way Tuesday amid mixed data and Fed comments. Personal income rose 0.2% versus the expected 0.1% increase. Outlays rose 0.1% as expected. Core PCE prices rose 0.1% as expected which indicated inflation remained muted. Consumer confidence printed at 96.2, stronger than the expected 94.5 read. Fed Chair Yellen helped rates fall with dovish remarks midweek. Yellen said that rising inflation is not a guarantee and the future of rate hikes will be data dependent. Weekly jobless claims were 276K versus the expected 265K. Unemployment was 5% versus the expected 4.9%. Payrolls rose 215K versus the expected 205K increase. Mortgage interest rates finished the week better by approximately 1/2 of a discount point.


Date & Time

Factory Orders Monday, April 4,
10:00 am, et
Up 1.4% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Trade Data Tuesday, April 5,
8:30 am, et
$45B deficit Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
Fed Minutes Wednesday, April 6,
2:00 pm, et
None Important. Details of the last Fed meeting will be thoroughly analyzed.
Weekly Jobless Claims Thursday, April76,
8:30 am, et
278K Important. An indication of employment. Higher claims may result in lower rates.
Consumer Credit Thursday, April 7,
3:00 pm, et
$10.8B Low importance. A significantly large increase may lead to lower mortgage interest rates.

Trade Data

In the distant past the US economy tended to be viewed as relatively unaffected by economic activity in other countries. However, increased trades with other countries and an increased reliance on foreign purchases of US debt have generated a market awareness of trade-related issues. The exchange rate of the dollar and foreign trade flows are interrelated. One must buy dollars to purchase US exports, and sell dollars to buy imports. Likewise, foreign investment in US debt requires the purchase of US dollars, and is thus affected by exchange rates.

Each month the Commerce Department gathers an enormous amount of detailed data on exports and imports. The data is broken between goods and services trade. The overall trade balance is the dollar difference between US exports and imports on a seasonally adjusted basis. The report also highlights trade flows between the US and various partners. Since the mid-1970’s, US imports of consumer and capital goods have exceeded exports, so a merchandise trade deficit has existed. The US has always maintained a service trade surplus, and because this surplus is not enough to offset the merchandise trade deficit, a net export deficit has resulted.

Due to the overwhelming amount of data considered, trade is difficult to forecast, and can present surprises. For a variety of reasons, the financial markets will often be unaffected by surprises in trade data. However, the data still has the ability to cause mortgage interest rate volatility.

Rates remain historically very favorable. Floating over an extended period of time carries some risk. Now is a great time to take advantage of the great rates.

Copyright 2016. All Rights Reserved. Mortgage Market Information Services, Inc. The information contained herein is believed to be accurate, however no representation or warranties are written or implied.