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Mortgage Market in Review – June 27, 2016

Market Comment

Mortgage bond prices finished the week higher which pushed rates lower. Rate movements were primarily tied to Brexit sentiment. Rates were higher the beginning of the week as uncertainty loomed. Britain voted to exit the European Union which ignited world economic volatility Friday. Fortunately the flight to safety buying of U.S. debt instruments resumed Friday, the losses from earlier in the week were erased, and rates improved as a result. Durable goods orders fell 2.2% versus the expected 0.6% decrease. The Treasury auctions were mixed with the 2Y weak and the 7Y strong. Weekly jobless claims were 259K versus the expected 275K which pressured rates higher Thursday. Mortgage interest rates finished the week better by approximately 1/8 to 1/4 of a discount point primarily because of the higher surge in prices Friday morning as traders digested the Brexit news.

LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Q1 GDP Third Estimate Tuesday, June 28,
8:30 am, et
Up 0.7% Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
Consumer Confidence Tuesday, June 28,
10:00 am, et
92 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
Personal Income and Outlays Wednesday, June 29,
8:30 am, et
Up 0.3%,Up 0.8% Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
PCE Core Inflation Wednesday, June 29,
8:30 am, et
Up 0.2% Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.
Weekly Jobless Claims Thursday, June 30,
8:30 am, et
277K Important. An indication of employment. Higher claims may result in lower rates.
ISM Index Friday, July 1,
10:00 am, et
51.4 Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
Construction Spending Friday, July 1,
10:00 am, et
Up 0.8% Low importance. An indication of economic strength. Significant weakness may lead to lower rates.

Gross Domestic Product

The U.S. Department of Commerce’s Bureau of Economic Analysis releases the Gross Domestic Product (GDP) report each quarter. GDP is one the most important reports during any given quarter. The initial report is often based on incomplete data. Therefore, additional revisions are released over the following two months.

GDP is a measure of US economic output and spending. The report is significant in that it provides investors, analysts, traders, and economists with a comprehensive report of the direction of the economy. In addition, it also influences the decisions of Federal Reserve policy makers, Congressional budget employees, and corporate financial planners. GDP is the sum total of goods and services produced by the United States.

Real GDP “increased at an annual rate of 0.8 percent in the first quarter of 2016,” according to the second estimate released by the Bureau of Economic Analysis. Real GDP increased 1.4 percent in the prior quarter. The Fed recently projected GDP to be 2.2 percent in 2016, 2.1 percent in 2017, and 2.0 percent in 2018. Many forecasters aren’t as optimistic.

The GDP release has the ability to swing the financial markets in the short term. Be cautious heading into the GDP release in the event the data comes in against us.


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.