Market Comment
Mortgage bond prices finished the week lower which pushed rates higher. Trading was narrow and uneventful up until the Fed meeting Wednesday afternoon (see article below). New home sales were 468K versus the expected 550K. Durable goods orders fell 1.2% as expected. Consumer confidence was a weaker than expected 97.6. Analysts looked for a reading of 102.8. Q3 Gross domestic product rose 1.5% versus the expected 1.6% increase. Weekly jobless claims were 260K versus the expected 265K which was not rate friendly. PCE core inflation rose a lower than expected 0.1%. Consumer Sentiment was 90.0 versus the expected 92.5 mark. Mortgage interest rates finished the week worse by about 3/8 of a discount point.
Rate Hike Back in Focus Market sentiment regarding a future Fed rate hike changed quickly last week in response to the Fed meeting. The Fed kept rates unchanged however indicated, “Information received since the Federal Open Market Committee met in September suggests that economic activity has been expanding at a moderate pace.” The vote was 9 to 1. Voting against the action was Jeffrey M. Lacker, who preferred to raise the target range for the federal funds rate by 25 basis points at that meeting. Odds makers had the chance of a Fed rate hike in December at around 33% prior to the Fed meeting. That afternoon the odds increased dramatically to around 47%. The Fed is clear that they will eventually need to raise rates. The timing of the hike remains the biggest uncertainty. Now is a great time to take advantage of historically low mortgage interest rates to avoid future market volatility.
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