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Mortgage Market in Review – March 2, 2015

 

Market Comment

Mortgage bond prices finished the week unchanged which kept rates in check. Rates were initially negative Tuesday morning in response to Fed Chair Yellen’s comments to Congress. However, rates improved throughout the late morning as her testimony continued. Yellen indicated a rate hike could happen at any meeting but went on to clarify that a rate hike will be preceded by a forward guidance revision. Mixed data Thursday resulted in choppy trading. Weekly jobless claims were 313K versus the expected 290K which was rate friendly. Durable goods rose 2.8% versus the expected 1.7% increase and core CPI rose 0.2% versus no expected change which was not good for rates. Mortgage interest rates finished the week with no real discount point changes despite some significant ups and downs throughout the week.

LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Personal Income and Outlays Monday, March 2,
8:30 am, et
Up 0.2%,
Down 0.2%
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
PCE Core Inflation Monday, March 2,
8:30 am, et
Up 0.1% Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.
ISM Index Monday, March 2,
10:00 am, et
53.8 Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, March 4,
8:30 am, et
222k Important. An indication of employment. Weakness may bring lower rates.
Fed “Beige Book” Wednesday, March 4,
2:00 pm, et
None Important. This Fed report details current economic conditions across the US. Weakness may help rates.
Weekly Jobless Claims Thursday, March 5,
8:30 am, et
308k Important. An indication of employment. Higher claims may result in lower rates.
Q4 Revised Productivity Thursday, March 5,
8:30 am, et
Up 0.4% Important. A measure of output per hour. Improvement may lead to lower mortgage rates.
Factory Orders Thursday, March 5,
10:00 am, et
Up 0.4% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Employment Friday, March 6,
8:30 am, et
5.7%,
Payrolls +275
Very important. An increase in unemployment or weakness in payrolls may bring lower rates.

Employment

The employment report provides an abundance of information for many sectors of the economy and is probably the most important piece of data released each month. Not only does the release give basic employment payroll statistics for the major working sectors, it also provides the average hourly earnings and the average workweek. Economists use this information provided by the Bureau of Labor Statistics (BLS) of the U.S. Department of Labor to estimate many other economic indicators such as industrial production, personal income, housing starts, and GDP monthly revisions. Since there is little data for economists to base their estimates on, the margin of error for the estimates tends to be high. As a result, the employment report can cause substantial market movements. The BLS compiles data from two unrelated surveys that they conduct, the household survey and the establishment survey, in order to complete the report. This explains why there is sometimes a divergence between the unemployment rate and payrolls figure. Be alert heading into the release.

 

 

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