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Mortgage Market in Review – November 21, 2016

Market Comment

Mortgage bond prices finished the week sharply lower which caused rates to surge higher.  Market sentiment believes that the economy will expand and cause inflation to rise through deficit spending and Trump rolling back regulations enacted under Obama.  Retail sales rose 0.8% versus the expected 0.6% increase.  The dollar strengthened when interest rates rose because foreign traders sold local currencies to purchase the dollar in a chase for yield.  In addition, the prospect of a Fed rate hike in December pushed the dollar to the strongest level in over a year.  Weekly jobless claims were 235K versus the expected 257K.  This added to the sentiment that the Fed will hike rates next month and brought the odds north of 90%.  Mortgage interest rates finished the week higher by almost a full discount point..


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
2Y Treasury Note Auction Monday, Nov. 21,
1:15 pm, et
None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Existing Home Sales Tuesday, Nov. 22,
10:00 am, et
5.48M Low importance.  An indication of mortgage credit demand.  Significant weakness may lead to lower rates.
5Y Treasury Note Auction Tuesday, Nov. 22,
1:15 pm, et
None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims Wednesday, Nov. 23,
8:30 am, et
230K Important.  An indication of employment.   Higher claims may result in lower rates.
Durable Goods Orders Wednesday, Nov. 23,
8:30 am, et
Up 1.2% Important.  An indication of the demand for “big ticket” items.  Weakness may lead to lower rates.
New Home Sales Wednesday, Nov. 23,
10:00 am, et
595K Important.  An indication of economic strength and credit demand.  Weakness may lead to lower rates.
U of Michigan Consumer Sentiment Wednesday, Nov. 23,
10:00 am, et
96.5 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.
7Y Treasury Note Auction Wednesday, Nov. 23,
1:15 pm, et
None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Fed Minutes Wednesday, Nov. 23,
2:00 pm, et
None Important.  Details of the last Fed meeting will be thoroughly analyzed.

Yellen

Fed Chair Yellen indicated last week she intends to stay at the Federal Reserve until her term expires January 2018.  There was speculation following the Presidential election that she will leave prior to then.

She noted that “the markets try to anticipate what policies congress and the administration will put into effect.”  We saw higher debt yields and a stronger dollar the past week as a result.  Yellen anticipates an expansionary policy from both political bodies and as a result the possibility of higher inflation.  Inflation, real or perceived, erodes the value of fixed income investments and prices generally fall while rates rise.  The safe thing to do is to take advantage of mortgage interest rates at these still historically favorable levels and avoid future market volatility.


Copyright 2016. 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.