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Mortgage Market in Review – October 9, 2017

 

Market Comment

Mortgage bond prices finished the week lower which put upward pressure on rates. Rates were worse the beginning of the week amid no data and strong stocks. Prices recovered a little Wednesday amid some instability in the Eurozone tied to Catalonia’s bid for independence from Spain. ADP Employment showed a reading of 135K. Analysts expected the report to show a 160K increase. Weekly jobless claims were 260K versus the expected 265K. Fed official Fischer said he expected low unemployment to lift wages and inflation. He was so confident in this forecast that he said it will show up and when it does everyone will say “that is what we expected.” His remarks were almost prescient as the employment report caused some surprises two days later (details in article below). We ended the week worse by approximately 1/4 to 3/8 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
3-year Treasury Note Auction Tuesday, Oct. 10,
1:15 pm, et
None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
10-year Treasury Note Auction Wednesday, Oct. 11,
1:15 pm, et
None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Producer Price Index Thursday, Oct. 12,
8:30 am, et
Up 0.2%,
Core up 0.1%
Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates.
Weekly Jobless Claims Thursday, Oct. 12,
8:30 am, et
268K Important. An indication of employment. Higher claims may result in lower rates.
30-year Treasury Bond Auction Thursday, Oct. 12,
1:15 pm, et
None Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
Retail Sales Friday, Oct. 13,
8:30 am, et
Up 0.4% Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates.
Consumer Price Index Friday, Oct. 13,
8:30 am, et
Up 0.3%,
Core up 0.2%
Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates.
U of Michigan Consumer Sentiment Friday, Oct. 13,
10:00 am, et
95.4 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Weather Sacks Payrolls

The employment report was mixed last week with unemployment at an unexpected 4.2% level (expected 4.4%), payrolls down a shocking 33,000 (expected +80K), and average hourly earnings up 0.5% (expected +0.2%). Analysts blamed the last two components on the recent hurricanes. The payrolls figure is calculated from a survey of employers that count any worker that isn’t paid at any time during the period as unemployed. The higher wage component is also being attributed to lower wage jobs which took a hit while higher end jobs did not. The headline employment rate treats anyone that got paid during the period as being employed.

Economic recovery is expected to continue with a boost jobs in the months ahead tied to the recovery efforts. The big concern is if that wage figure will continue to escalate. If it levels off rates could remain steady. Continued signs of wage inflation will likely result in higher mortgage interest rates. Now is a great time to take advantage of historically favorable rates.


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.