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Mortgage Market in Review – July 28, 2014

Market Comment Mortgage bond prices finished the week near unchanged which held rates relatively steady. Weak stocks Monday helped bonds improve a bit. Consumer prices rose 0.3% in June and the core value, which excludes the volatile food and energy costs, rose 0.1%. Traders expected CPI to rise 0.3% and 0.2% respectively. Weekly jobless claims were a lower than expected 284k versus the anticipated 308k reading and mortgage interest rates spiked higher Thursday morning. New home sales came in at 406k versus the expected 475k mark which wasn’t a good sign for the housing market. Mortgage interest rates rose by about 1/8 of a discount point for the trading week.

LOOKING AHEAD

Economic Indicator Release Date & Time Consensus Estimate Analysis
Consumer Confidence Tuesday, July 29 10:00 am, et 84.9 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, July 30, 8:30 am, et 157k Important. An indication of employment. Weakness may bring lower rates.
Q2 Advance GDP Wednesday, July 30, 8:30 am, et Up 0.3% Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
Fed Meeting Adjourns Wednesday, July 30, 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, July 31, 8:30 am, et 278k Important. An indication of employment. Higher claims may result in lower rates.
Q2 Employment Cost Index Thursday, July 31, 8:30 am, et Up 0.3% Very important. A measure of wage inflation. Weakness may lead to lower rates.
Employment Friday, August 1, 8:30 am, et 6.1%, Payrolls +273k Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
Personal Income and Outlays Friday, August 1, 8:30 am, et Up 0.2%, Up 0.1% Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
PCE Core Inflation Friday, August 1, 8:30 am, et Up 0.2% Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.
ISM Index Friday, August 1, 10:00 am, et 55.6 Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.

Recent Rate Changes
Rates remain historically favorable despite continued volatility. The cost of a mortgage can literally change in a matter of minutes as traders buy and sell mortgage-backed securities throughout each trading day. Borrowers can sometimes be surprised at the quick changes which can cause the “illusion” that rates are high.
Rates typically rise when data shows the economy is improving. This usually results in some stock strength at the expense of bonds. However, many in the financial markets remain concerned stocks are too high and the recovery remains wobbly. A short-term pullback in stocks could help rates.

Copyright 2014. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com The information contained herein is believed to be accurate, however no representation or warranties are written or implied.