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Mortgage Market in Review – November 6, 2017

 

Market Comment

Mortgage bond prices finished the week higher which helped recover some of the recent rate increases.  Rates were positive the beginning of the week after a tame inflation reading.  Core PCE, the Fed’s preferred gauge, rose 0.1% as expected.  Personal income and spending rose 0.4% and 1% respectively.  Some of the rate improvements were erased Wednesday after stronger than expected employment data.  ADP payrolls were 235K.  Analysts expected a reading of 215K.  The Fed kept rates unchanged as expected and said economic activity is rising at a “solid pace” however inflation remains soft.  Weekly jobless claims were 229K versus the expected 235K.  Unemployment was 4.1% and payrolls rose 261K.  We ended the week better by approximately 1/8 to 1/4 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
3-year Treasury Note Auction Tuesday, Nov. 7,
1:15 pm, et
None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Consumer Credit Tuesday, Nov. 7,
3:00 pm, et
$14B Low importance.  A significantly large increase may lead to lower mortgage interest rates.
10-year Treasury Note Auction Wednesday, Nov. 8,
1:15 pm, et
None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims Thursday, Nov. 9,
8:30 am, et
230K Important.  An indication of employment.   Higher claims may result in lower rates.
30-year Treasury Bond Auction Thursday, Nov. 9,
1:15 pm, et
None Important.  Bonds will be auctioned.  Strong demand may lead to lower mortgage rates.
U of Michigan Consumer Sentiment Friday, Nov. 10,
10:00 am, et
100.8 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Consumer Sentiment

In the US the consumer is often seen as the driving force of the economy.  A large percentage of the total economic output is for personal use.  Analysts attempt to predict the future spending patterns of consumers to gauge economic activity.

The Michigan consumer sentiment index is one piece of data used to measure consumer attitudes.  The index is derived from a telephone survey, which gathers information on consumer expectations of the overall economy.  The preliminary report is released around the 10th of each month and then is revised throughout the remainder of the month.  It is significant in that it provides a precursor into consumers’ willingness to spend in the months ahead.    However, many analysts point out that willingness to spend does not always convert to actual expenditures.

As the economy continues to improve, housing prices escalate, and energy prices remain historically tame, American consumers continue to increase their spending.  However, any jolts ahead of the holiday season could cause concern.    Look for any variation from estimates in the consumer data this week to cause mortgage interest rate volatility.  Signs of eroding consumer confidence could lead to improvements in mortgage interest rates.  However, stronger than expected figures could spike rates higher.


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