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Mortgage Market in Review – February 29, 2016

Market Comment

Mortgage bond prices finished the week slightly lower with put a little upward pressure on rates.  Mixed talk from Fed officials caused uncertainty.  The data early in the week was friendly toward lower rates.  Consumer confidence printed at 92.2 versus the expected 97.3.  New home sales printed at 494K vs. the expected 523K.  The FHFA Housing Price Index rose 0.5%, further proof it is a good time to own a home.  Weekly jobless claims were near expectations. Durable goods orders surprised to the upside with a 4.9% increase versus the expected 2% increase.  The biggest shock was Q4 data that showed stronger than expected economic growth.  Gross domestic product rose 1.0% versus the expected 0.4% increase.  This sent MBS prices lower and rates higher Friday morning.  Mortgage interest rates finished the week worse by approximately 1/4 to 3/8 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
ISM Index Tuesday, March 1,
10:00 am, et
48.4 Important.  A measure of manufacturer sentiment.  Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, March 2,
8:30 am, et
218K Important.  An indication of employment.  Weakness may bring lower rates.
Fed “Beige Book” Wednesday, March 2,
2:00 pm, et
None Important.  This Fed report details current economic conditions across the US.  Signs of weakness may lead to lower rates.
Weekly Jobless Claims Thursday, March 3,
8:30 am, et
270K Important.  An indication of employment.   Higher claims may result in lower rates.
Revised Q4 Productivity Thursday, March 3,
8:30 am, et
Up 0.1% Important.  A measure of output per hour.  Improvement may lead to lower mortgage rates.
Factory Orders Thursday, March 3,
10:00 am, et
Down 2.2% Important.  A measure of manufacturing sector strength.  Weakness may lead to lower rates.
Employment Friday, March 4,
8:30 am, et
4.9%,
Payrolls +163K
Very important.  An increase in unemployment or weakness in payrolls may bring lower rates.
Trade Data Friday, March 4,
8:30 am, et
$43.6B deficit Important.  Affects the value of the dollar.  A falling deficit may strengthen the dollar and lead to lower rates.

ADP Employment

The ADP employment report is a measure of employment derived from data of roughly 500,000 US businesses.  The survey focuses on the private sector of the economy.  In contrast, the Bureau of Labor Statistics releases the regular employment report which includes both private and government employment statistics.

 

The Fed is usually focused on inflation.  Tightening employment conditions can result in wage inflation.  The ADP report provides solid data on these conditions.  Despite this, the data can still diverge from the regular employment report.  The employment report is derived from a household survey and an establishment survey.

 

These surveys often differ from one another and from the ADP employment report in that they are based on different data sets.  There are no guarantees that the most important employment report the first Friday of each month will mirror the ADP report released 2 days prior.

 

 

 

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