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Mortgage Market in Review – March 9, 2015

Market Comment

Mortgage bond prices finished the week sharply lower which pushed rates higher. Rates were stable the first portion of the week with generally benign data. Personal Income rose 0.3% versus the expected 0.4% increase. Outlays fell 0.2% versus the expected 0.1% decrease. The PCE core inflation rose 0.1% as expected. The ISM Index was 52.9 versus the expected 53.1. The European Central Bank released details of their QE program and our rates shot higher midweek. The biggest blow came Friday morning with the employment report. Unemployment was 5.5% versus the expected 5.6%. Non-farm payrolls rose 295K versus the expected 240K increase. The stronger than expected results added fuel to investor fears of a Fed rate increase this year. Mortgage interest rates finished the week worse by approximately 5/8 of a discount point.

LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
3-year Treasury Note Auction Tuesday, March 10,
1:15 pm, et
None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
10-year Treasury Note Auction Wednesday, March 11,
1:15 pm, et
None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims Thursday, March 12,
8:30 am, et
225k Important. An indication of employment. Higher claims may result in lower rates.
Retail Sales Thursday, March 12,
8:30 am, et
Down 0.5% Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates.
Business Inventories Thursday, March 12,
10:00 am, et
Up 0.2% Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates.
30-year Treasury Bond Auction Thursday, March 12,
1:15 pm, et
None Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
Producer Price Index Friday, March 13,
8:30 am, et
Down 0.3%,
Unchanged
Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates.
U of Michigan Consumer Sentiment Friday, March 13,
10:00 am, et
95.5 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Weather

Economists often debate the effect weather has on the economy. There is no debate the Federal Reserve believes weather plays a role. They mentioned the word “weather” 36 times in the latest Beige Book report on economic conditions. Weather was cited in the reports of many districts.

The exceptionally cold winter across most of the U.S. is to blame for lots of things, from 36 hour traffic jams to broken pipes all along the east coast and high heating bills. However, weather events have been great for some businesses despite being terrible for others. The overall impact on the economy continues to be debated.

The US economy seemed to move in the right direction the first few months of the year. Employment data remained solid and inflation was below the Fed’s target rate. The Fed Beige Book indicated “as spring approaches, general contractors expect a period of fairly robust hiring, including craft workers, project engineers, and managers.”

Time will tell if the economy grows stronger with a change in weather. The Fed wants to see more data supporting strength before raising rates. Many predict a Fed rate hike possibly as soon as summer and mortgage rates have risen lately because of those fears.

 


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