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Mortgage Market in Review – August 27, 2018

   

Market Comment

Mortgage bond prices finished the week mixed with conventional prices a little lower and government prices near neutral. Existing home sales were 5.34M versus the expected 5.4M. Weekly jobless claims were 210K and continuing claims were 1727K. Analysts expected readings of 215K and 1729K. New home sales and the FHFA house price index both increased near forecasts. Durable goods fell 1.7% versus the expected 0.6% decline. However, orders factoring out auto sales rose 0.2% versus an expected 0.3% increase. Mortgage interest rates finished the week unchanged to higher by approximately 1/8 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Consumer Confidence Tuesday, Aug. 28,
10:00 am, et
128 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
Treasury Auctions Begin Tuesday, Aug. 28,
1:15 pm, et
None Important. 2Y Notes on Tuesday, 5Y Notes on Wednesday, and 7Y Notes on Thursday.
Q2 GDP Wednesday, Aug. 29,
8:30 am, et
Up 4% Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
Personal Income and Outlays Thursday, Aug. 30,
8:30 am, et
Up 0.3%,
Up 0.3%
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
PCE Core Inflation Thursday, Aug. 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.
Weekly Jobless Claims Thursday, Aug. 30,
8:30 am, et
212K Important. An indication of employment. Higher claims may result in lower rates.
U of Michigan Consumer Sentiment Friday, Aug. 31,
10:00 am, et
95.5 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Hurricane Season

The Federal Reserve is clear that weather plays a significant part in the overall economy. The U.S. enters the heart of hurricane season and the weather is almost certain to make headlines as we saw this weekend in Hawaii. Hurricane Lane is the biggest weather event the islands have experienced in decades. Many Gulf and eastern seaboard states know the dangers hurricanes can bring. Large storms often shut down or damage oil operations in the Gulf of Mexico. Local areas are often hit hard, but the damage doesn’t stop there. While a specific area may have no threat of a hurricane or severe weather a single storm can cause financial losses that ripple through the entire economy.

The U.S. Energy Information Administration indicates that “during major disruptions such as hurricanes or power outages, the Department issues situation reports to provide information about a disruption’s effect on gasoline supply and other energy infrastructure and supply issues.” The National Oceanic and Atmospheric Administration indicates hurricane season officially begins in June but notes that storms often start in August as water warms. Mid-September is the hot point.

The good news in the short term is that recent projections point toward fewer storms this year due to colder water in the Atlantic. That doesn’t mean there won’t be any weather events, as we see in Hawaii now.


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