Skip to content

Mortgage Market in Review – April 9, 2018

   

Market Comment

Mortgage bond prices finished the week lower which put upward pressure on rates.  We started with higher rates early Monday morning but that reversed as stocks stumbled.  Global equities were shaken as US and China trade tensions escalated.  The Institute for Supply Management (ISM) printed at 59.3 which did not move rates much as it was near expectations.  Factory orders rose 1.2% which was weaker than expected 1.8% increase.  Weekly jobless claims were 242K.  Analysts expected a reading of 225K.    The US trade deficit was a higher than expected $57.6B.  Unemployment was 4.1% versus the expected 4.0%.  Payrolls rose 103K versus the expected 170K increase.  We ended the week unchanged to worse by 1/8 a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Producer Price Index Tuesday, April 10,
8:30 am, et
Up 0.3%,
Core up 0.2%
Important.  An indication of inflationary pressures at the producer level.  Weaker figures may lead to lower rates.
3-year Treasury Note Auction Tuesday, April 10
1:15 pm, et
None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Consumer Price Index Wednesday, April 11,
8:30 am, et
Up 0.2%,
Core up 0.2%
Important.  A measure of inflation at the consumer level.  Weaker figures may lead to lower rates.
10-year Treasury Note Auction Wednesday, April 11,
1:15 pm, et
None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims Thursday, April 12,
8:30 am, et
242K Important.  An indication of employment.   Higher claims may result in lower rates.
30-year Treasury Bond Auction Thursday, April 12,
1:15 pm, et
None Important.  Bonds will be auctioned.  Strong demand may lead to lower mortgage rates.
U of Michigan Consumer Sentiment Friday, April 13,
10:00 am, et
101.6 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Foreign Demand

Global investors are constantly searching for opportunities that will provide the greatest return with the least amount of acceptable risk.  While higher rates of return are enticing, they are not without considerably higher risk

 

Investment products inherently all possess some sort of risk.  Many market participants searched for a safe haven in the US financial markets even with their shortcomings as global financial markets struggled.  With the backing of the US Government, investors viewed the US Treasury and mortgage bond markets as less risky investment opportunities amid global economic uncertainty.  This resulted in an increased demand for US investments, such as the mortgage-backed securities that affect mortgage interest rates.  Increased demand for mortgage bonds moved prices higher and interest rates lower.  A reversal of this foreign demand could result in future spikes in mortgage interest rates, especially if China reduces their US Treasury holdings.  Some fear this “nuclear” option as US and China continue to ramp up sanctions on one another.  China holds over a trillion dollars of US debt.  An aggressive move to dump their holdings could cause global chaos.  Caution is the key heading into the auctions this week.

 

There is a real possibility of market swings.  Mortgage interest rates remain historically favorable.

 


Copyright 2018. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com The information contained herein is believed to be accurate, however no representation or warranties are written or implied.