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Mortgage Market in Review – October 2, 2017

 

Market Comment

Mortgage bond prices finished the week near unchanged to slightly lower which put a little upward pressure on rates. Rates were flat the beginning of the week and then shot higher Wednesday and Thursday in response to stronger than expected data. Durable orders rose 1.7% versus the expected 0.7% increase. Revised Q2 GDP rose 3.1% versus the expected 3% increase. Weekly jobless claims were near expectations. Mixed data Friday morning kept rates steady. The core PCE, the Fed’s preferred inflation gauge, rose 0.1%. Analysts looked for an increase of 0.2%. Personal income and spending rose 0.2% and 0.1% respectively which were exactly as analysts anticipated. The Chicago PMI was at 65.2 versus the expected 58 mark. We ended the week unchanged to worse by approximately 1/8 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
ISM Index Monday, Oct. 2,
10:00 am, et
59 Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
Construction Spending Monday, Oct. 2,
10:00 am, et
Down 0.2% Low importance. An indication of economic strength. Significant weakness may lead to lower rates.
ADP Employment Wednesday, Oct. 4,
8:30 am, et
240K Important. An indication of employment. Weakness may bring lower rates.
Weekly Jobless Claims Thursday, Oct. 5,
8:30 am, et
268K Important. An indication of employment. Higher claims may result in lower rates.
Trade Data Thursday, Oct. 5,
8:30 am, et
$45B deficit Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
Factory Orders Thursday, Oct. 5,
10:00 am, et
Up 0.2% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Employment Friday, Oct. 6,
8:30 am, et
4.4%,
Payrolls +178K
Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
Consumer Credit Friday, Oct. 6,
3:00 pm, et
$19.5B Low importance. A significantly large increase may lead to lower mortgage interest rates.

Yellen Leaves Markets Uncertain

Fed Chair Yellen indicated last week that “My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation.” However, she went on to note that “Without further modest increases in the federal funds rate over time, there is a risk that the labor market could eventually become overheated, potentially creating inflationary problems down the road that might be difficult to overcome without triggering a recession.” These statements caused some uncertainties as the Fed appears perplexed by the recent low inflation readings. The Fed wants to see inflation at their 2% target and will continue to raise rates gradually but has to be careful that they don’t hinder the recovering economy in the process. The good news in the short term is that mortgage rates remain historically low as a result of low inflation. Now is a great time to take advantage of rates at these levels.


Copyright 2017. 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.