Market Comment
Mortgage bond prices finished the week lower which pushed rates sharply higher. The data Monday morning started us off on a bad note and that continued throughout most of the week. Industrial production rose 0.6% versus the expected 0.1% increase. Capacity use came in @ 78.8% versus the expected 78.5%. Stocks showed strong gains as a result. The Fed revised their forward outlook and mortgage interest rates skyrocketed Wednesday afternoon in response. Fed Chair Yellen’s press conference only added fuel to the fire. Better than expected weekly jobless claims piled on to an already downtrodden MBS market. Mortgage interest rates finished the week worse by almost a full discount point.
LOOKING AHEAD
|
Economic
Indicator
|
Release
Date & Time
|
Consensus
Estimate
|
Analysis
|
| Consumer Confidence |
Tuesday, March 25,
10:00 am, et
|
78.7
|
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| New Home Sales |
Tuesday, March 25,
10:00 am, et
|
525k |
Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
| Treasury Auctions Begin |
Tuesday, March 25,
1:15 pm, et
|
None
|
Important. 2Y Notes on Tuesday, 5Y Notes on Wednesday, and 7Y Notes on Thursday. |
| Durable Goods Orders |
Wednesday, March 26,
8:30 am, et
|
Up 0.2%
|
Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
| Weekly Jobless Claims |
Thursday, March 27,
8:30 am, et |
307k |
Important. An indication of employment. Higher claims may result in lower rates. |
| Q4 GDP revision |
Thursday, March 27,
8:30 am, et |
Up 2.4% |
Moderately important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| Personal Income and Outlays |
Friday, March 28,
8:30 am, et |
Up 0.1%,
Up 0.2% |
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| PCE Core Inflation |
Friday, March 28,
8:30 am, et |
Up 0.1% |
Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve. |
| U of Michigan Consumer Sentiment |
Friday, March 28,
10:00 am, et |
79.8 |
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Strange Similarity
A little over a year ago former Fed Chairman Bernanke caused short-term turmoil in the bond market with his comments that followed the March 2013 Fed meeting. Bernanke warned that the Fed could adjust the size of monthly bond purchases in response to changing economic conditions. That ignited trader fears, a selloff of mortgage bonds ensued, and mortgage interest rates jumped higher.
Last week new Fed Chair Yellen provided her own shock to the financial markets. She was questioned when the Fed expected to start raising the Fed funds rate, currently at zero, following the end of the bond buying program known as quantitative easing. Most of her responses were couched in vagueness but she provided three words, “about six months”, which sent bond prices sharply lower. Under that scenario, assuming the taper continues as expected, the Fed Funds Rate may increase in April of 2015. Market participants were expecting the Fed Funds Rates to stay near zero until the fall of 2015.
The future remains uncertain. Now is a great time to take advantage of mortgage interest rates.
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