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Mortgage Market in Review – March 30, 2015

Market Comment

Mortgage bond prices finished the week near unchanged holding mortgage rates steady. Rates were stable the first portion of the week despite mixed data. New home sales and core CPI were higher than expected, however traders took the data in stride. New home sales printed at 539K, much better than the expected 465K economists had estimated. Durable goods orders were much lower than expected and rate friendly. Orders fell 1.4% vs. the expected 0.4% increase. Rates rose Wednesday afternoon and Thursday morning despite stock market weakness and renewed troubles in the Middle East. Global investors moved to cash deferring investment decisions for the time being. Mortgage interest rates finished the week near unchanged.

LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Personal Income and Outlays Monday, March 30,
8:30 am, EDT
Up 0.2% Important.  A measure of consumers’ ability to spend.  Weakness may lead to lower mortgage rates.
PCE Core Inflation Monday, March 30,
8:30 am, EDT
Up 0.1% Important.  A measure of price increases for all domestic personal consumption.  Weaker figure may help rates improve.
Consumer Confidence Tuesday, March 31,
10:00 am, EDT
96.4 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, April 1,
8:30 am EDT
215K Important.  An indication of employment.  Weakness may bring lower rates.
ISM Index Wednesday, April 1,
10:00 am EDT
53.2 Important.  A measure of manufacturer sentiment.  Weakness may lead to lower mortgage rates.
Weekly Jobless Claims Thursday, April 2,
8:30 am, EDT
292K Important.  An indication of employment.   Higher claims may result in lower rates.
Trade Data Thursday, April 2,
8:30 am, EDT
$42B deficit Important.  Affects the value of the dollar.  A falling deficit may strengthen the dollar and lead to lower rates.
Factory Orders Thursday, April 2,
10:00 am, EDT
 Down 0.2% Important.  A measure of manufacturing sector strength.  Weakness may lead to lower rates.
Employment Friday, April 3,
8:30 am EDT
5.4%,
Payrolls +285k
Very important.  An increase in unemployment or weakness in payrolls may bring lower rates.

Wage Inflation

This is “jobs week” with three reports detailing the employment situation. ADP employment, weekly jobless claims, and the heavyweight employment report will all be factored into future Fed rate hike decisions.

Federal Reserve Chairperson Janet Yellen is tasked with two distinct mandates, full employment and price stability. Full employment is where everyone who wants to work can. Price stability, as defined by the Federal Reserve, is an inflation rate of 2%.

The BLS report on Friday includes data on wages received by workers. Wages have not risen above inflation since 1999. Put another way, the US worker has not had a raise in almost 15 years. Any hint of rising wages will cause the Fed to raise rates quicker than most expect. Be extremely cautions this week, especially Friday.

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