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Mortgage Market in Review – October 24, 2016

Market Comment

Mortgage bond prices finished the week near unchanged which kept rates flat.  Rates were higher the beginning of the week as traders continued to focus on Yellen’s warning of “consequences” if the Fed waited too long to raise rates.  The early data was tame.  Industrial production rose 0.1% and capacity utilization was 75.4% which were about as expected.  Rates recovered mid-week as the data showed economic weakness.  Housing starts printed at 1,047K verses the expected 1,168K.  Weekly jobless claims printed at 260K versus the expected 249K.  Leading Economic Indicators (LEI) rose 0.2% as expected.  The Philadelphia Fed survey, an indication of economic activity in the mid-Atlantic region, printed at 9.7. Analysts expected a 5.5 reading.  Mortgage interest rates finished the week near unchanged.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
FHFA House Price Index Tuesday, Oct. 25,
10:00 am, et
Up 0.5% Moderately Important.  A measure of single family house prices.  Weakness may lead to lower rates.
Consumer Confidence Tuesday, Oct. 25,
10:00 am, et
101.1 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.
Treasury Auctions Begin Tuesday, Oct. 25,
1:15 pm, et
None Important.  2Y Notes on Tuesday, 5Y Notes on Wednesday, and 7Y Notes on Thursday.
New Home Sales Wednesday, Oct. 26,
10:00 am, et
615K Important.  An indication of economic strength and credit demand.  Weakness may lead to lower rates.
Weekly Jobless Claims Thursday, Oct. 27,
8:30 am, et
255K Important.  An indication of employment.   Higher claims may result in lower rates.
Durable Goods Orders Thursday, Oct. 27,
8:30 am, et
Up 0.8% Important.  An indication of the demand for “big ticket” items.  Weakness may lead to lower rates.
Q3 Advance GDP Friday, Oct. 28,
8:30 am, et
Up 1.4% Very important.  The aggregate measure of US economic production.  Weakness may lead to lower rates.
Q1 Employment Cost Index Friday, Oct. 28,
8:30 am, et
Up 0.4% Very important. A measure of wage inflation.  Weakness may lead to lower rates.
U of Michigan Consumer Sentiment Friday, Oct. 28,
10:00 am, et
87 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Market Conditions

There is a Chinese proverb that states, “May you live in interesting times.” It is often argued that the word interesting is meant to be a synonym for turbulent or dangerous. This phrase hits the bull’s-eye given the current state of the financial markets and the looming Presidential election.  Many traders are concerned the Fed will raise rates before the end of the year and it is an understatement to say that the election is polarizing.  Three Fed officials voted for an increase at the last meeting.  The Fed has difficult decisions to make.  They may need to raise rates.  However, the last thing they want to do is stifle the economic recovery they have worked so hard to produce.  Timing is the key.  Now is a great time to take advantage of low rates to avoid any future rate spikes.


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.