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Mortgage Market in Review – January 27 2014

Market Comment

Mortgage bond prices finished the week higher which helped mortgage interest rates fall. Rates were relatively calm the first portion of the week with no data. Trading was choppy Wednesdayafternoon as traders positioned ahead of the data releases Thursday. Weekly jobless claims came in @ 326k versus the expected 327k Thursday morning. The data was relatively in line with expectations and mortgage rates recovered the losses from Wednesday. Existing home sales came in at 4.87m versus the expected 4.89m mark. Leading economic indicators rose 0.1% versus the expected 0.2% increase. Overall the data was rate friendly. Mortgage interest rates finished the week better by approximately 1/4 of a discount point.

LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

New Home Sales

Monday, Jan. 27,
10:00 am, et

468k

Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.

Durable Goods Orders

Tuesday, Jan. 28,
8:30 am, et

Up 2.4%

Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.

Consumer Confidence

Tuesday, Jan. 28,
10:00 am, et

77.6

Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Treasury Auctions Begin

Tuesday, Jan. 28,
1:15 pm, et

None

Important. 2Y Notes on Tuesday, 5Y Notes on Wednesday, and 7Y Notes on Thursday.

Fed Meeting Adjourns

Wednesday, Jan. 29,
2:15 pm, et

No rate changes

Important. Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting.

Weekly Jobless Claims

Thursday, Jan. 30,
8:30 am, et

328k

Important. An indication of employment. Higher claims may result in lower rates.

Q4 Advance GDP

Thursday, Jan. 30,
8:30 am, et

Up 3.9%

Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.

Personal Income and Outlays

Friday, Jan. 31,
8:30 am, et

Up 0.2%,
Up 0.3%

Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.

PCE Core Inflation

Friday, Jan. 31,
8:30 am, et

Up 0.1%

Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.

Q4 Employment Cost Index

Friday, Jan. 31,
8:30 am, et

Up 0.3%

Very important. A measure of wage inflation. Weakness may lead to lower rates.

U of Michigan Consumer Sentiment

Friday, Jan. 31,
10:00 am, et

80.1

Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Taper Talk Continues

Market participants will again focus on the Federal Reserve and reductions in asset purchases this week. The Fed tapered mortgage-backed security purchases in January and many analysts anticipate another taper announcement from their meeting Wednesday. Most of the recent data supports another taper but the weak payrolls component of the employment report this month and some recent stock weakness add additional uncertainty. The reaction to the last taper announcement caused mortgage interest rates to spike higher in the short term. It is very possible we could see a repeat this week. Floating in this environment has risks. Now is a great time to take advantage of rates.

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