| Market Comment
Mortgage bond prices finished the week near unchanged which held rates steady. Rates increased Monday morning amid little data only to swing lower Tuesday morning. The NAHB Housing Index came in at 64 versus the expected 68 mark. This was the lowest level since November 2016. Housing starts were 1215K. Analysts expected a reading of 1155K. The Philadelphia Fed report showed a business conditions index of 19.5 versus the expected 22 mark. This was also the lowest level since last November. Leading economic indicators rose 0.6% versus the expected 0.4% increase. The 10 Year TIPS auction was disappointing with weaker than average foreign demand. Trading was muted in the afternoons in a typical summer trading pattern. We ended the week with discount points near unchanged.
LOOKING AHEAD
Economic
Indicator |
Release
Date & Time |
Consensus
Estimate |
Analysis |
| FHFA House Price Index |
Tuesday, July 25,
10:00 am, et |
Up 1.1% |
Moderately Important. A measure of single family house prices. Weakness may lead to lower rates. |
| Consumer Confidence |
Tuesday, July 25,
10:00 am, et |
119 |
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| New Home Sales |
Wednesday, July 26,
10:00 am, et |
625K |
Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
| Fed Meeting Adjourns |
Wednesday, July 26,
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. |
| Durable Goods Orders |
Thursday, July 27,
8:30 am, et |
Up 0.8% |
Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
| Weekly Jobless Claims |
Thursday, July 27,
8:30 am, et |
242K |
Important. An indication of employment. Higher claims may result in lower rates. |
| Q2 Advance GDP |
Friday, July 28,
8:30 am, et |
Up 1.4% |
Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| Q2 Employment Cost Index |
Friday, July 28,
8:30 am, et |
Up 0.8% |
Very important. A measure of wage inflation. Weakness may lead to lower rates. |
| U of Michigan Consumer Sentiment |
Friday, July 28,
10:00 am, et |
93.4 |
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
The Fed
The Federal Reserve meets this week and no rate changes are expected. Financial markets currently price in an approximate 44% chance of a hike by December with little chance this week. Many analysts strongly believe there is a greater than 50% chance of a hike before the end of the year. The one thing this week’s meeting could bring is additional insight into other Fed moves beside rate hikes. Many economists predict the Fed will announce a reduction in their balance sheet by the September meeting. This means they will stop reinvesting in mortgage-backed securities in an effort to push rates higher.This isn’t a huge surprise as many Fed officials continue to prime the financial markets for such an occurrence but could cause volatility in the short term.
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