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Mortgage Market in Review – March 12, 2018

   

Market Comment

Mortgage bond prices finished the week lower which pushed rates slightly higher.  Rates were higher the first portion of the week.  The trade deficit was higher than expected.  Productivity was unchanged and labor costs rose 2.5%.  Analysts expected a slight decrease in productivity and a cost increase of 2.1%.  ADP payrolls showed the economy added 235,000 jobs. That data was much better than the 193,000 jobs traders expected.  The Fed Beige Book released earlier this week cited growing “labor shortages” in most districts.  Higher than expected weekly jobless claims reversed some of the earlier rate increases.  Claims printed at 231K versus the expected 220K.  Unemployment was 4.1%.  Payrolls rose 313K versus the expected 200K.  We ended the week worse by approximately 1/4 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Consumer Price Index Tuesday, March 13,
8:30 am, et
Up 0.4%,
Core up 0.3%
Important.  A measure of inflation at the consumer level.  Weaker figures may lead to lower rates.
Retail Sales Wednesday, March 14,
8:30 am, et
Up 0.4% Important.  A measure of consumer demand.  A smaller than expected increase may lead to lower mortgage rates.
Producer Price Index Wednesday, March 14,
`8:30 am, et
Up 0.4%,
Core up 0.3%
Important.  An indication of inflationary pressures at the producer level.  Weaker figures may lead to lower rates.
Weekly Jobless Claims Thursday, March 15,
8:30 am, et
230K Important.  An indication of employment.   Higher claims may result in lower rates.
Philadelphia Fed Survey Thursday, March 15,
10:00 am, et
25 Moderately important.  A survey of business conditions in the Northeast.  Weakness may lead to lower rates.
Housing Starts Friday, March 16,
8:30 am, et
1330K Important.  A measure of housing sector strength.  Weakness may lead to lower rates.
Industrial Production Friday, March 16,
9:15 am, et
Up 0.2% Important.  A measure of manufacturing sector strength.  A lower than expected increase may lead to lower rates.
Capacity Utilization Friday, March 16,
9:15 am, et
77.5% Important.  A figure above 85% is viewed as inflationary.  Weaker figure may lead to lower rates.
U of Michigan Consumer Sentiment Friday, March 16,
10:00 am, et
99.9 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Manage Risks

To make wise lock decisions everyone needs to be aware of two primary risks.  Those are price and event risks.  Price risk is simply where the market stands since regularly scheduled morning pricing.  Event risk is the economic data that is heading our way.  Most rate changes come in response to an economic release.  A borrower that chooses to float in front of economic events takes a very big financial risk.

 

Floating overnight when there is little data and positive movement since pricing is a calculated risk.  Floating with losses ahead of a significant release is a gamble.  Most borrowers would be wise to take advantage of current rates and then refinance in the future if rates fall.

 


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