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Mortgage Market in Review – May 24, 2017

   

Market Comment

Mortgage bond prices finished the week higher which helped rates improve. Trading was quiet the first of the week with a positive bias. Stock weakness mid-week resulted in some nice rate improvements as flight to safety buying emerged. This was reversed slightly Thursday afternoon as stocks recovered some of the earlier losses. The economic data was mixed. Housing starts were weaker than expected while industrial production showed a stronger surge higher. Weekly jobless claims were 232K. Analysts expected a reading of 240K. The Philadelphia Fed business conditions index was 38.8 versus the expected 18.5 mark. Leading economic indicators rose 0.3% as expected. Mortgage interest rates finished the week better by approximately 3/8 of discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
New Home Sales Tuesday, May 23,
10:00 am, et
655K Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
Treasury Auctions Begin Tuesday, May 23,
1:15 pm, et
None Important. 2Y Notes on Tuesday, 5Y Notes on Wednesday, and 7Y Notes on Thursday.
FHFA House Price Index Wednesday, May 24,
10:00 am, et
Up 1.1% Moderately Important. A measure of single family house prices. Weakness may lead to lower rates.
Existing Home Sales Wednesday, May 24,
10:00 am, et
5.75M Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
Weekly Jobless Claims Thursday, May 25,
8:30 am, et
230K Important. An indication of employment. Higher claims may result in lower rates.
Durable Goods Orders Friday, May 26,
8:30 am, et
Up 0.7% Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.
Q1 GDP Revised Friday, May 26,
8:30 am, et
Up 0.8% Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment Friday, May 26,
10:00 am, et
97.9 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Fed Talk

Fed officials speak all the time. Analysts constantly attempt to divine the future from their remarks. Recent comments from Fed officials warn of a balance sheet reduction possibly as soon as this year. That means that the Fed will eventually stop reinvesting in mortgage backed securities. This event will result in higher mortgage interest rates. The timing is uncertain but once it begins rates will likely escalate.

Cleveland Fed President Mester indicated last week that she believes the Fed should start the reduction this year. She said, “If we delay taking further normalization steps for too long and then find ourselves in a situation where the labor market becomes unsustainably tight, price pressures become excessive, and we have to move up rates steeply, we could risk a recession.” San Francisco President Williams called for the reinvestment to end this year as well.

Now is a great time to take advantage of historically favorable rates.

Copyright 2017. 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.