Skip to content

Mortgage Market in Review – Feb. 23, 2015

Mortgage bond prices finished the week lower which put upward pressure on rates. Rates started the week on a negative note in continuation of the selloff the prior Friday ahead of the extended holiday weekend. The negative trend continued despite some rate friendly data. Housing starts were 1065K versus the expected 1070K. The producer price index fell 0.8% versus the expected 0.4% decrease. The core, which excludes volatile food and energy prices, fell 0.1% versus the expected 0.1% increase. Rates recovered a little Wednesday in response to the minutes from the last Fed meeting. The Fed indicated a desire to see more evidence of growth before raising rates. However, better than expected weekly jobless claims data Thursday tempered the recovery. Mortgage interest rates finished the week worse by approximately 1/4 of a discount point.LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Existing Home Sales Monday, Feb. 23,
10:00 am, et
5.05m Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
Consumer Confidence Tuesday, Feb. 24,
10:00 am, et
98.7 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
New Home Sales Wednesday, Feb. 25,
10:00 am, et
478k Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
Weekly Jobless Claims Thursday, Feb. 26,
8:30 am, et
278k Important. An indication of employment. Higher claims may result in lower rates.
Consumer Price Index Thursday, Feb. 26,
8:30 am, et
Down 0.1%,
Core up 0.1%
Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates.
Durable Goods Orders Thursday, Feb. 26,
8:30 am, et
Down 1.2% Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.
FHFA House Price Index Thursday, Feb. 26,
10:00 am, et
Up 0.6% Moderately Important. A measure of single family house prices. Weakness may lead to lower rates.
Q4 GDP 2nd Estimate Friday, Feb. 27,
8:30 am, et
Up 2.6% Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment Friday, Feb. 27,
10:00 am, et
93.8 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Fed Testimony

The Fed Chair delivers the Federal Reserve’s semiannual report on monetary policy, familiarly called the Humphrey-Hawkins report, to both the House and Senate Banking Committees in February and July. The report is one of the most important speeches given by the Fed Chair and was originally mandated by the Full Employment and Balanced Growth Act. The remarks made to each committee tend to be identical in nature and address basic economic principles. The areas addressed tend to be the overall state of the US economy, recent developments, economic fundamentals, foreign developments, economic outlook, ranges for growth, and concluding remarks. Senator Hubert Humphrey and Representative Augustus Hawkins originally sponsored the legislation in 1977.

There is a potential for market volatility anytime Fed Chair Yellen speaks. The testimony starts Tuesday morning and continues Wednesday. Exactly what rates will do is unknown, even to Yellen. Therefore a cautious approach to rate decisions is prudent heading into this event.