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Mortgage Market in Review – May 28, 2018

   

Market Comment

Mortgage bond prices finished the week sharply higher which put downward pressure on rates. We started the week on a positive note and the trend continued with only some minor selling Tuesday morning and Thursday afternoon. New home sales were 662K. Analysts expected 700K. Weekly jobless claims were a higher than expected 234K. Analysts looked for a reading of 220K. The data supported the Fed’s wait and see approach rather than fanning the flames that the Fed needs to act quickly to raise rates. The March FHFA Housing Price Index rose 0.1% versus the expected 0.6% increase. Existing home sales were a weaker than expected 5.46M. We ended the week better by 1/2 to 5/8 of a discount point.

LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Consumer Confidence Tuesday, May 29,
10:00 am, et
128.8 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, May 30,
8:30 am, et
206K Important. An indication of employment. Weakness may bring lower rates.
Q1 GDP 2nd estimate Wednesday, May 30,
8:30 am, et
Up 2.3% Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
Fed “Beige Book” Wednesday, May 30,
2:00 pm, et
None Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates.
Personal Income and Outlays Thursday, May 31,
8:30 am, et
Up 0.3%,
Up 0.1%
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
PCE Core Inflation Thursday, May 31,
8:30 am, et
Up 0.1% Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.
Weekly Jobless Claims Thursday, May 31,
8:30 am, et
401K Important. An indication of employment. Higher claims may result in lower rates.
ISM Index Friday, June 1,
10:00 am, et
57.5 Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
Employment Friday, June 1,
8:30 am, et
3.9%,
Payrolls +170K
Very important. An increase in unemployment or weakness in payrolls may bring lower rates.

ADP Employment

The ADP employment report is a measure of employment derived from data of roughly 500,000 US businesses. The survey focuses on the private sector of the economy. In contrast, the Bureau of Labor Statistics releases the regular employment report which includes both private and government employment statistics.

The Fed is usually focused on inflation. Tightening employment conditions can result in wage inflation. The ADP report provides solid data on these conditions. Despite this, the data can still diverge from the regular employment report. The employment report is derived from a household survey and an establishment survey. These surveys often differ from one another and from the ADP employment report in that they are based on different data sets. There are no guarantees that the most important employment report the first Friday of each month will mirror the ADP report released 2 days prior but the Fed looks at all the data.

 

 

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