Market Comment – September 26, 2015
Mortgage bond prices finished the week lower which pushed rates higher. Rates were worse the beginning of the week in response to 100 plus point gains in stocks Monday morning. Some of the losses were reversed Tuesday as stocks struggled. The data was mixed. Existing home sales were weaker than expected. The FHFA Housing Price Index was higher than expected. Weekly jobless claims were 267K versus the expected 271K. Final Q2 Gross Domestic Product was 3.9% compared to the expected 3.7%. Comments from Fed Chair Yellen Thursday night caused rate concerns (see below.) Mortgage interest rates finished the week worse by about 3/8 to 1/2 of a discount point.
LOOKING AHEAD
| Economic Indicator |
Release Date & Time |
Consensus Estimate |
Analysis |
| Personal Income and Outlays | Monday, Sept. 28, 8:30 am, et |
Up 0.3%, Up 0.3% |
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| PCE Core Inflation | Monday, Sept. 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. |
| Consumer Confidence | Tuesday, Sept. 29, 10:00 am, et |
101.3 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| ADP Employment | Wednesday, Sept. 30, 8:30 am, et |
197K | Important. An indication of employment. Weakness may bring lower rates. |
| Weekly Jobless Claims | Thursday, Oct. 1, 8:30 am, et |
265K | Important. An indication of employment. Higher claims may result in lower rates. |
| ISM Index | Thursday, Oct. 1, 10:00 am, et |
51.1 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Employment | Friday, Oct. 2, 8:30 am, et |
5.1%, Payrolls +185K |
Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
| Factory Orders | Friday, Oct. 2, 10:00 am, et |
Up 0.3% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
Yellen Speaks
Fed Chair Yellen caused some volatility in the mortgage backed securities market Thursday evening and Friday with her remarks about future Fed rate hikes. Yellen spoke to an audience at the University of Massachusetts, Amherst about the U.S. economy and interest rates. She indicated “most of my colleagues and I anticipate that it will likely be appropriate to raise the target range for the federal funds rate sometime this year.” Yellen was clear that the decision depends on economic data. However, she stated that a delay could result in greater volatility and “the more prudent strategy is to begin tightening in a timely fashion and at a gradual pace.”
This isn’t the first warning from the Fed concerning interest rate increases. Earlier in the year the Fed warned of a likely hike in September which did not materialize. There are no certainties regarding the timing of the Fed rate hike but they are making a clear case that it is close.
Now is a great time to take advantage of mortgage interest rates at these historically favorable levels.
