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Mortgage Market in Review – September 5, 2016


Market Comment

Mortgage bond prices finished the week near unchanged which kept rates steady. There was some seesaw trading but within a relatively narrow margin as Fed officials continued to discuss rate increases. Fed Vice-Chair Fischer said the economy was near full employment. Consumer confidence was expected at 97 but came in at a 101.1 reading. ADP employment increased 177K versus the expected 170K increase. Weekly jobless claims were 263K versus the expected 265K. Productivity fell 0.6% versus the expected 0.5% decrease. ISM Index was a weaker than expected 49.4. Analysts looked for a mark of 52. Unemployment was 4.9% and payrolls increased 151K. The market expected a higher payrolls number of 180K. Mortgage interest rates finished the week unchanged to better by approximately 1/8 of a discount point.


Date & Time

Labor Day Monday, Sept. 5 None Important. Extended holiday weekend may result in volatility when trading resumes Tuesday morning.
Fed “Beige Book” Wednesday, Sept. 7,
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, Sept. 8,
8:30 am, et
265K Important. An indication of employment. Higher claims may result in lower rates.
Consumer Credit Friday, Sept. 9,
3:00 pm, et
$12.3B Low importance. A significantly large increase may lead to lower mortgage interest rates.


The 10 and 30-year Treasury bond yields are often viewed as “benchmarks”, reflecting the overall state of interest rates in the US economy. Many people concerned about mortgage interest rates track these bonds as a barometer for mortgage interest rates. However, in reality the Treasury and mortgage markets trade independently.

The supply and demand characteristics of Treasury bonds and mortgage-backed securities (MBS) differ significantly. Treasury securities represent money needed to fund the operations of the US government. MBSs, on the other hand, represent borrowing by homeowners.

Information related to Treasury bonds is relatively easy to come by. Almost every major news medium reports changes. On the other hand, accurate mortgage interest rate information is difficult and costly to obtain.

In the absence of information directly related to the mortgage interest rate markets, Treasury information can be useful in that the bond market generally trends in the same direction. However, mortgage interest rates can vary significantly. In fact, many times the Treasuries will trade wildly while MBS only see minor price changes and vice versa. Last Friday mortgage-backed securities rose 1/32nd at 10 am ET pricing while the 10-year Treasury fell 8/32nds and the 30-year Treasury fell 24/32nds at that time. This is a prime example where anyone that looked solely at Treasuries thought the mortgage market worsened when in reality it held steady. The data provides a valuable lesson into the differences between treasury bonds and mortgage-backed securities. This is an example of why looking solely at treasuries can mislead people. Keying in on the correct information can mean the difference between saving and losing a tremendous amount of money when making float and lock decisions.

Copyright 2016. All Rights Reserved. Mortgage Market Information Services, Inc. The information contained herein is believed to be accurate, however no representation or warranties are written or implied.