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Mortgage Market in Review – December 7, 2015

Market Comment

Mortgage bond prices finished the week slightly lower which pushed rates a bit higher. Trading started on a positive note early in the week amid some weak data. The ISM index was 48.6 versus the expected 50.5 reading. Productivity in the third quarter rose 2.2% as expected. Rates were higher mid week in response to stronger than expected employment data. ADP payrolls, an indication of the health of private sector employment, showed the US economy added 217,000 jobs in November. Economists expected the creation of 190,000 jobs. The European Central Bank cut the deposit rate banks receive as expected but some wanted a larger cut. The jobs component of the employment report was better than expected. Mortgage interest rates finished the week worse by approximately 1/8 to 1/4 of a discount point.


Date & Time

Consumer Credit Monday, Dec. 7,
3:00 pm, et
$25B Low importance.  A significantly large increase may lead to lower mortgage interest rates.
3-year Treasury Note Auction Tuesday, Dec. 8,
1:15 pm, et
None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
10-year Treasury Note Auction Wednesday, Dec. 9,
1:15 pm, et
None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims Thursday, Dec. 10,
8:30 am, et
266K Important.  An indication of employment.   Higher claims may result in lower rates.
30-year Treasury Bond Auction Thursday, Dec. 10,
1:15 pm, et
None Important.  Bonds will be auctioned.  Strong demand may lead to lower mortgage rates.
Producer Price Index Friday, Dec. 11,
8:30 am, et
Up 0.1%,
Core unchanged
Important.  An indication of inflationary pressures at the producer level.  Weaker figures may lead to lower rates.
Retail Sales Friday, Dec. 11,
8:30 am, et
Up 1.4% Important.  A measure of consumer demand.  A smaller than expected increase may lead to lower mortgage rates.
U of Michigan Consumer Sentiment Friday, Dec. 11,
10:00 am, et
92.8 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Rate Hike Likely

The probability of a Fed rate hike this month increased after the stronger than expected employment results last Friday and ADP data earlier in the week.  Payrolls increased 211,000 versus an expected increase of 196,000.  Analysts now place the odds that the Fed will raise rates at their December 16th meeting at around 80%.  If this occurs, it will be the first rate hike since June 2006 and will signal a turning point for interest rates.
The bad news is that the markets have generally priced in the event as traders positioned themselves ahead of the meeting and rates are higher as a result.  The good news is that most analysts predict the Fed will hold after the initial rate increase.  Fed Chair Yellen stated, “Of course, even after the initial increase in the federal funds rate, monetary policy will remain accommodative.”  This provides some hope that rates can remain relatively low despite the upward trend.  With so much uncertainty now is a great time to take advantage of historically low mortgage interest rates to avoid future market volatility.

Copyright 2015. 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.