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Mortgage Market in Review – Nov. 25, 2013

Mortgage bond prices finished the week lower, which pushed mortgage interest rates sharply higher.  Rates improved gradually the first of the week.  The employment cost index data was in line with expectations.  Unfortunately rates spiked higher Wednesday and Thursday in response to stronger than expected retail sales data and the Fed minutes (see below.)  Better than expected weekly jobless claims added fuel to the negative movement Thursday morning.  Claims came in @ 323k versus the expected 333k mark. Mortgage interest rates finished the week worse by approximately 1/2 of a discount point.

LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

2-year Treasury Note Auction

Monday, Nov. 25,
1:15 pm, et

None

Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.

Housing Starts

Tuesday, Nov. 26,
8:30 am, et

897k

Important.  A measure of housing sector strength.  Weakness may lead to lower rates.

Consumer Confidence

Tuesday, Nov. 26,
10:00 am, et

71

Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

5-year Treasury Note Auction

Tuesday, Nov. 26,
1:15 pm, et

None

Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.

Weekly Jobless Claims

Wednesday, Nov. 27,
8:30 am, et

318k

Important.  An indication of employment.   Higher claims may result in lower rates.

Durable Goods Orders

Wednesday, Nov. 27,
 8:30 am, et

Up 0.8%

Important.  An indication of the demand for “big ticket” items.  Weakness may lead to lower rates.

U of Michigan Consumer Sentiment

Wednesday, Nov. 27,
10:00 am, et

71.5

Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Leading Economic Indicators

Wednesday, Nov. 27,
10:00 am, et

Up 0.4%

Important.  An indication of future economic activity.  A smaller increase may lead to lower rates.

7-year Treasury Note Auction

Wednesday, Nov. 27,
1:15 pm, et

None

Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.

Taper Talk

The minutes from the October Federal Reserve Open Market Committee meeting released November 20th indicated a reduction in asset purchases could start sooner rather than later.  This reignited fears that interest rates will rise as the Fed gradually exits the mortgage-backed securities market.  Mortgage interest rates rose ¾ of a discount point Wednesday afternoon in response to the release.

The Fed said members “generally expected that the data would prove consistent with the Committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months.”

The data ahead will have a huge role in Fed policy.  The Fed watches data points and we would be wise to watch them as well.  Reports on employment, inflation (not an issue now) and the consumer (retail sales, sentiment etc.) can cause extreme market movements.

Interest rates at the current levels are a sure thing.  Floating in this environment is very risky.

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Copyright 2013. 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.