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Mortgage Market in Review – June 29, 2015

Market Comment

Mortgage bond prices finished the week sharply lower which pushed rates higher. Trading was volatile amid mixed data. Rates shot higher Monday morning on reports of a Greek debt deal. That failed to materialize however developments dominated headlines throughout the week. Fed Voter Powell spoke Tuesday and said there is a 50/50 chance of a Fed rate hike in September. New Home Sales were 546K versus the expected 525K. This was not rate friendly. Revised Q1 GDP was down 0.2% as expected. Personal Income rose 0.5% as expected. Outlays rose 0.9% versus the expected 0.7% increase. PCE core inflation rose 0.1% as expected. Weekly jobless claims were 271K versus the expected 272K. Mortgage interest rates finished the week worse by over a full discount point.


Date & Time

Consumer Confidence Tuesday, June 30,
10:00 am, et
95.6 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, July 1,
8:30 am, et
222K Important. An indication of employment. Weakness may bring lower rates.
ISM Index Wednesday, July 1,
10:00 am, et
52.7 Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
Construction Spending Wednesday, July 1,
10:00 am, et
Up 1.8% Low importance. An indication of economic strength. Significant weakness may lead to lower rates.
Weekly Jobless Claims Thursday, July 2,
8:30 am, et
272K Important. An indication of employment. Higher claims may result in lower rates.
Employment Thursday, July 2,
8:30 am, et
Payrolls +208K
Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
Factory Orders Thursday, July 2,
10:00 am, et
Down 0.4% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
July 4th Holiday Friday, July 3 None Important. Most Federal Offices are closed July 3rd in advance of the holiday.

Trading This Week

Market conditions that often lead to mortgage interest rate volatility are thin trading and shortened trading weeks. If very few market participants are buying and selling bonds, the potential for short-term volatility is escalated. A large buyer or seller can execute trading orders that, without additional traders to buffer out the extreme buying or selling, can lead to swift market movements. In addition, shortened trading weeks have the potential to compress a week’s worth of trading into fewer days. Bond traders often take defensive positions ahead of weekends and holidays to guard against unforeseen events that could possibly jeopardize their investments. This positioning can be beneficial or detrimental to mortgage interest rates. If investors sell stocks and buy mortgage-backed securities, mortgage interest rates will improve. However, if investors sell mortgage-backed securities and hold cash positions, mortgage interest rates will rise.

Holidays can often result in volatility as trading resumes following the extended close. This week could result in market swings that are favorable or negative in nature. Considering the heightened possibility for mortgage interest rate volatility, a cautious approach to interest rate exposure is prudent.

Copyright 2015. All Rights Reserved. Mortgage Market Information Services, Inc. The information contained herein is believed to be accurate, however no representation or warranties are written or implied.