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Mortgage Market in Review – March 24, 2014

Market Comment

Mortgage bond prices finished the week lower which pushed rates sharply higher. The data Monday morning started us off on a bad note and that continued throughout most of the week. Industrial production rose 0.6% versus the expected 0.1% increase. Capacity use came in @ 78.8% versus the expected 78.5%. Stocks showed strong gains as a result. The Fed revised their forward outlook and mortgage interest rates skyrocketed Wednesday afternoon in response. Fed Chair Yellen’s press conference only added fuel to the fire. Better than expected weekly jobless claims piled on to an already downtrodden MBS market. Mortgage interest rates finished the week worse by almost a full discount point.

LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

Consumer Confidence

Tuesday, March 25,
10:00 am, et

78.7

Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

New Home Sales

Tuesday, March 25,
10:00 am, et

525k

Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.

Treasury Auctions Begin

Tuesday, March 25,
1:15 pm, et

None

Important. 2Y Notes on Tuesday, 5Y Notes on Wednesday, and 7Y Notes on Thursday.

Durable Goods Orders

Wednesday, March 26,
8:30 am, et

Up 0.2%

Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.

Weekly Jobless Claims

Thursday, March 27,
8:30 am, et

307k

Important. An indication of employment. Higher claims may result in lower rates.

Q4 GDP revision

Thursday, March 27,
8:30 am, et

Up 2.4%

Moderately important. The aggregate measure of US economic production. Weakness may lead to lower rates.

Personal Income and Outlays

Friday, March 28,
8:30 am, et

Up 0.1%,
Up 0.2%

Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.

PCE Core Inflation

Friday, March 28,
8:30 am, et

Up 0.1%

Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.

U of Michigan Consumer Sentiment

Friday, March 28,
10:00 am, et

79.8

Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Strange Similarity

A little over a year ago former Fed Chairman Bernanke caused short-term turmoil in the bond market with his comments that followed the March 2013 Fed meeting. Bernanke warned that the Fed could adjust the size of monthly bond purchases in response to changing economic conditions. That ignited trader fears, a selloff of mortgage bonds ensued, and mortgage interest rates jumped higher.

Last week new Fed Chair Yellen provided her own shock to the financial markets. She was questioned when the Fed expected to start raising the Fed funds rate, currently at zero, following the end of the bond buying program known as quantitative easing. Most of her responses were couched in vagueness but she provided three words, “about six months”, which sent bond prices sharply lower. Under that scenario, assuming the taper continues as expected, the Fed Funds Rate may increase in April of 2015. Market participants were expecting the Fed Funds Rates to stay near zero until the fall of 2015.

The future remains uncertain. Now is a great time to take advantage of mortgage interest rates.

Copyright 2014. 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.