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Mortgage Market in Review – March 6, 2017

Market Comment

Mortgage bond prices finished the week sharply lower which pushed rates higher.  Rates were stable Monday as the data was in line with expectations.  Durable goods orders rose 1.8%.  The market became volatile Tuesday afternoon in response to comments from Fed officials.  Dallas Fed President Kaplan said the Fed needs to raise rates sooner rather than later and the exact timing is not important.  San Francisco Fed President Williams said he saw a March move as a real possibility.  The PCE core inflation reading rose 0.4% versus the expected 0.2% increase which also pressure rates higher.  Weekly jobless claims printed at 233K. Analysts expected claims at 245K.  Q4 GDP Second Estimate was 1.9%. Analysts expected a reading of 2.1%. Mortgage interest rates finished the week worse by over a full discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Factory Orders Monday, March 6,
10:00 am, et
Up 1.5% Important.  A measure of manufacturing sector strength.  Weakness may lead to lower rates.
Trade Data Tuesday, March 7,
8:30 am, et
$44.5B deficit Important.  Affects the value of the dollar.  A falling deficit may strengthen the dollar and lead to lower rates.
3-year Treasury Note Auction Tuesday, March 7,
1:15 pm, et
None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
ADP Employment Wednesday, March 8,
8:30 am, et
236K Important.  An indication of employment.  Weakness may bring lower rates.
Revised Q4 Productivity Wednesday, March 8,
8:30 am, et
Up 1.4% Important.  A measure of output per hour.  Improvement may lead to lower mortgage rates.
10-year Treasury Note Auction Wednesday, March 8,
1:15 pm, et
None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims Thursday, March 9,
8:30 am, et
225K Important.  An indication of employment.   Higher claims may result in lower rates.
30-year Treasury Bond Auction Thursday, March 9,
1:15 pm, et
None Important.  Bonds will be auctioned.  Strong demand may lead to lower mortgage rates.
Employment Friday, March 10,
8:30 am, et
4.8%,
Payrolls +239K
Very important.  An increase in unemployment or weakness in payrolls may bring lower rates.

Will They or Won’t They?

Several Fed officials warned of a rate hike last week possibly as soon as the Fed March 14/15 meeting.  There was less than a 30% chance the beginning of the week of a March increase.  That figure increased to in excess of 75% by the end of the week.

 

Many analysts point to the upcoming employment report as the only thing that will alter the Fed’s next move.  Signs of continued employment strength or wage inflation will likely result in action from the Fed this month.  Any indication that the recovery is wobbly could keep the Fed at bay for the time being.

 

Now is a great time to take advantage of still historically favorable rates to avoid future volatility.

 


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