Mortgage Market In Review – January 9, 2017

January 10, 2017
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.


LOOKING AHEAD

Economic
Indicator		 Release
Date & Time		 Consensus
Estimate
Analysis
Consumer Credit Monday, Jan. 9,
3:00 pm, et		 $15.6B Low importance. A significantly large increase may lead to lower mortgage interest rates.
3-year Treasury Note Auction Tuesday, Jan. 10,
1:15 pm, et		 None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
10-year Treasury Note Auction Wednesday, Jan. 11,
1:15 pm, et		 None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims Thursday, Jan. 12,
8:30 am, et		 235K Important. An indication of employment. Higher claims may result in lower rates.
30-year Treasury Bond Auction Thursday, Jan. 12,
1:15 pm, et		 None Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
Producer Price Index Friday, Jan. 13,
8:30 am, et		 Up 0.4%,
Core up 0.3%		 Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates.
Retail Sales Friday, Jan. 13,
8:30 am, et		 Up 0.4% Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates.
U of Michigan Consumer Sentiment Friday, Jan. 13,
10:00 am, et		 98.2 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

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.
Data is difficult to predict. Estimates often vary wildly from economist to economist and major revisions are all too common. However, it isn’t difficult to know when an event that can cause market volatility is scheduled. This is crucial in making wise float and lock decisions.

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