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Mortgage Market in Review – February 1, 2016

Market Comment

Mortgage bond prices finished the week sharply higher which pushed rates lower.  Continued stock weakness early in the week helped rates improve.  Consumer sentiment printed at 98.1 versus the expected 96.8.  Cheap gas prices and rising home equity were good for consumers in January.  New home sales printed at 544K versus the expected 506K.  Durable goods orders fell 5.1% versus the expected 0.5% decline.  The Fed kept rates unchanged and market sentiment swung from an expected three or four additional rate hikes this year to maybe only one or two.    Oil prices remained low overall but rose for the week.  News that Russia and OPEC could cut a deal to reduce production by 5% in order to combat falling prices pressured oil prices higher.  Mortgage interest rates finished the week better by approximately 1/2 of a discount point.


Date & Time

PCE Core Inflation Monday, Feb. 1,
8:30 am, et
Up 0.1% Important.  A measure of price increases for all domestic personal consumption.  Weaker figure may help rates improve.
Personal Income and Outlays Monday, Feb. 1,
8:30 am, et
Up 0.2%,
Up 0.2%
Important.  A measure of consumers’ ability to spend.  Weakness may lead to lower mortgage rates.
ISM Index Monday, Feb. 1,
10:00 am, et
48.8 Important.  A measure of manufacturer sentiment.  Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, Feb. 3,
8:30 am, et
249K Important.  An indication of employment.  Weakness may bring lower rates.
Weekly Jobless Claims Thursday, Feb. 4,
8:30 am, et
282K Important.  An indication of employment.   Higher claims may result in lower rates.
Preliminary Q4 Productivity Thursday, Feb. 4,
8:30 am, et
Up 1.1% Important.  A measure of output per hour.  Improvement may lead to lower mortgage rates.
Factory Orders Thursday, Feb. 4,
10:00 am, et
Down 0.4% Important.  A measure of manufacturing sector strength.  Weakness may lead to lower rates.
Employment Friday, Feb. 5,
8:30 am, et
Payrolls +288K
Very important.  An increase in unemployment or weakness in payrolls may bring lower rates.

Negative Rate Cut

The Bank of Japan made a surprise rate cut last Friday in an attempt to stimulate their economy.  This rate cut was especially unique in that it implemented negative interest rates in the third largest economy in the world.  The BOJ set their benchmark rate to negative 0.1%.  This means commercial banks will have to pay the Bank of Japan 0.1% for some deposits.  This did not immediately impact consumer savings accounts but Japanese banks can decide to pass along the costs to consumers and start charging them in the near future.  Governor Kuroda said, “further falls in oil prices, uncertainty over emerging economies, including China, and global market instability could hurt business confidence and delay the eradication of people’s deflationary mindset.”  The BOJ went on to note that they will, “cut interest rates further into negative territory if judged as necessary.”


A flight to quality buying of U.S. investments followed the announcement.  This was positive for lower rates in the U.S. in the short term.  Now is a great time to take advantage of historically favorable mortgage interest rates.


Copyright 2016. 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.