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Mortgage Market in Review – June 20, 2016

Market Comment

Mortgage bond prices finished the week higher which pushed rates lower.  Rate movements were limited most of the week but the Fed meeting Wednesday afternoon and data Thursday resulted in a drop.  Retail sales increased 0.5% and were relatively in line with estimates.  Industrial production fell greater than expected.  Producer prices rose 0.4% and the core rose 0.3%.  These figures were higher than expected.  Consumer prices were very close to estimates with an increase of 0.2% and a core increase of 0.2%.  The Fed made no rate changes.  Weekly jobless data was higher than expected.  Claims came in at 277K versus the expected 269K and rates fell as a result.  Mortgage interest rates finished the week better by approximately 1/8 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Treasury Auctions Begin Monday, June 20,
1:15 pm, et
None Important.  2Y Notes on Monday, 5Y Notes on Tuesday, and 7Y Notes on Wednesday.
FHFA House Price Index Wednesday, June 22,
9:00 am, et
Up 0.6% Moderately Important.  A measure of single family house prices.  Weakness may lead to lower rates.
Existing Home Sales Wednesday, June 22,
10:00 am, et
5.5M Low importance.  An indication of mortgage credit demand.  Significant weakness may lead to lower rates.
Weekly Jobless Claims Thursday, June 23,
8:30 am, et
270K Important.  An indication of employment.   Higher claims may result in lower rates.
New Home Sales Thursday, June 23,
10:00 am, et
620K Important.  An indication of economic strength and credit demand.  Weakness may lead to lower rates.
Durable Goods Orders Friday, June 24,
8:30 am, et
Up 2.5% Important.  An indication of the demand for “big ticket” items.  Weakness may lead to lower rates.
U of Michigan Consumer Sentiment Friday, June 24,
10:00 am, et
94.2 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Brexit

The UK will vote on June 23rd whether to stay in the European Union (EU) or to leave it. The press has dubbed it “Brexit” which is short for British Exit.  The vote is taking place because British Prime Minister David Cameron made it a campaign promise in the 2015 election.  He was pressured into making the promise from a growing chorus of dissent from both his own party and other groups in the UK.  The United States in not the only country where political divisions run high.  Brexit is a political hot button in the UK and Europe as a whole.  Politicians say leaving could cause WWIII, global economic upheaval, higher mortgage rates in the UK, and put pensions at risk.

Traders hate uncertainty and dumped stocks and bought bonds ahead of the vote.   The “yield” on the 10-year Japanese bond is minus 25 basis points and minus three basis points for German 10-year notes.   Countries get paid to “borrow” money.  There is currently $10T ($10,000,000,000,000) in debt issued by governments that yields below zero percent.  The yield on the 10-year note in the US fell 17 basis points this month and currently yields around 1.62%.  It is anyone’s guess what a “leave” vote will do to global stocks and bonds, however a “stay” vote would most likely result in a reversal of the sharp drop in rates.  Prepare yourself and your referral partners for the outcome on the 24th.


Copyright 2016. 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.