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Mortgage Market in Review – December 26, 2016

   

Market Comment

Mortgage bond prices finished the week a little higher which helped rates remain steady. Rates were under a little pressure higher Tuesday amid reports that foreign governments continued to reduce U.S. debt holdings. There was a slight rebound Wednesday after the European Court of Justice ruled that a Spanish court cannot cap banks liabilities for mortgage securities. This resulted in a little flight to safety buying of U.S. debt such as mortgage-backed securities. Gross domestic product rose 3.5% versus the expected 3.3% increase. Durable goods fell 4.6% which was expected. Weekly jobless claims were a higher than expected 275K. Consumer sentiment was 98.2 as expected. New home sales were 592K, expected 573K. Mortgage interest rates finished the week lower by about 1/8 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Consumer Confidence Tuesday, Dec. 27,
10:00 am, et
108.2 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
2-year Treasury Note Auction Tuesday, Dec. 27,
1:15 pm, et
None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
5-year Treasury Note Auction Wednesday, Dec. 28,
1:15 pm, et
None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims Thursday, Dec. 29,
8:30 am, et
265K Important. An indication of employment. Higher claims may result in lower rates.
7-year Treasury Note Auction Thursday, Dec. 29,
1:15 pm, et
None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.

Consumer Confidence

The Conference Board releases the Consumer Confidence Index on the last Tuesday of every month. The report details the levels of confidence individual households have in the performance of the economy. The data is derived from a survey of 5,000 households nationwide. The survey polls consumer opinions on current business conditions, their jobs, their incomes, and their future spending plans. The Conference Board is a non-profit group that has produced the data since 1967.

The consumer confidence index is significant in that it provides a precursor into the willingness of consumers to spend in the months ahead. Consumers are vital to the US economy as consumer spending is a large portion of the gross domestic product. Manufacturers attempt to gauge consumer spending and adjust production accordingly. The challenge that many analysts note is the fact that a consumer’s willingness to spend does not always convert to an actual expenditure.

The most recent readings show an upward trend in consumer confidence. The October figure was 100.8 while we had a reading of 107.1 in November. Stocks surged higher since then so the December release is expected to be strong too. In addition, all indications are that the labor market remained on solid footing.

This week’s release will be eagerly anticipated. Look for any variation from estimates to cause mortgage interest rate volatility, especially amid trading conditions that are likely to be thin around the holidays.


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