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Mortgage Market in Review – November 28, 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.  Existing home sales were 5.6M versus the expected 5.4M.  Weekly jobless claims were 251K versus the expected 243K. Durable goods orders rose 4.8% versus the expected 1.1% increase. New home sales were 583K which was about as expected. Consumer sentiment was a higher than expected 93.8.  The Treasury auctions were mixed with lackluster demand for the 2 year and solid demand for the 7 year.  Mortgage interest rates finished the week higher by 3/4 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Q3 GDP Revision Tuesday, Nov. 29,
8:30 am, et
Up 2.8% Very important.  The aggregate measure of US economic production.  Weakness may lead to lower rates.
Consumer Confidence Tuesday, Nov. 29,
10:00 am, et
98 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, Nov. 30,
8:30 am, et
165K Important.  An indication of employment.  Weakness may bring lower rates.
Personal Income and Outlays Wednesday, Nov. 30,
8:30 am, et
Up 0.3%,
Up 0.4%
Important.  A measure of consumers’ ability to spend.  Weakness may lead to lower mortgage rates.
PCE Core Inflation Wednesday, Nov. 30,
8:30 am, et
Up 0.1% Important.  A measure of price increases for all domestic personal consumption.  Weaker figure may help rates improve.
Fed “Beige Book” Wednesday, Nov. 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.
Weekly Jobless Claims Thursday, Dec. 1,
8:30 am, et
245K Important.  An indication of employment.   Higher claims may result in lower rates.
ISM Index Thursday, Dec. 1,
10:00 am, et
51.4 Important.  A measure of manufacturer sentiment.  Weakness may lead to lower mortgage rates.
Employment Friday, Dec. 2,
8:30 am, et
4.9%,
Payrolls +165K
Very important.  An increase in unemployment or weakness in payrolls may bring lower rates.

ISM

The Institute for Supply Management (ISM), formerly the National Association of Purchasing Management (NAPM), releases the “Report on Business” on the first working day of each month.  Part of this report is the “diffusion index,” which tracks the economy’s ups and downs fairly well.

In conducting this survey, the ISM questions purchasing executives from over 250 industrial companies compiling data on production, orders, commodity prices, inventories, vendor performance, and employment.  Each of the respondents is asked to rank the categories as “up” or “down.”  Various weights are applied to the individual components to form the composite index.  A composite index reading of 50 can be thought of as a “swing point.”  A reading above 50 implies an increase in economic activity.  Be cautious heading into the release.


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