Market Comment
Mortgage bond prices finished the week a little higher which helped rates improve slightly. Rates were higher Tuesday as news out of the Eurozone showed stronger than expected economic growth. Rates fell Wednesday and Thursday. ADP employment was a weaker than expected 153K. Analysts looked for a reading of 170K. Weekly jobless claims were 235K versus the expected 265K. The employment report Friday was mixed but the inflation component received the most attention and rates worsened that morning as a result. Unemployment was at 4.7% as expected. Non-farm payrolls were weaker than expected. Average hourly earnings rose 0.4% versus the expected 0.3% increase which ignited some wage inflation fears. Mortgage interest rates still finished the week lower by about 1/8 to 1/4 of a discount point despite the up and down movements.
Fed Looks to Data The Fed made it clear that future Fed policy and specifically additional rate increases will be implemented as needed in response to future data releases. While there are many market forces that drive mortgage interest rates the Fed remains a primary agent for now. If the Fed is watching the economic data it would be wise to follow their lead. Economic data often drives trading sentiment in the short-term. A positive or negative release can cause mortgage interest rates to surge higher or lower in a very short time span. Very important releases such as the employment report can set the tone for trading for the month. An absence of data often results in very calm trading. |
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