MARKET COMMENT
Mortgage bond prices finished the week with rates near unchanged despite significant volatility throughout the week. Rates were worse Monday morning in carryover from the prior week amid no data. This trend reversed Tuesday in response to the end of the U.S. government shutdown. Stock strength Wednesday resulted in some additional MBS selling. The FHFA Housing Price Index rose 0.4% as expected. Weekly jobless claims printed at 233K and continuing claims, a summation of all receiving benefits, at 1937K. Claims were expected at 240K and continuing claims at 1902K. New home sales printed at 625K versus the expected 679K units. Leading Economic Indicators (LEI) rose 0.6% as expected. Q4 GDP rose 2.6% versus the expected 3% increase. Rates recovered Friday and we ended the week unchanged to worse by approximately 1/8 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Personal Income and Outlays | Monday, Jan. 29, 8:30 am, et | Up 0.3% p 0.5% | Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| PCE Core Inflation | Monday, Jan. 29, :30 am, et | Up 0.2% | Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve. |
| Consumer Confidence | Tuesday, Jan. 30, 10:00 am, et | 122 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| ADP Employment | Wednesday, Jan. 31, 8:30 am, et | 255K | Important. An indication of employment. Weakness may bring lower rates. |
| Q4 Employment Cost Index | Wednesday, Jan. 31, 8:30 am, et | Up 0.8% | Very important. A measure of wage inflation. Weakness may lead to lower rates. |
| Fed Meeting Adjourns | Wednesday, Jan. 31, 2:15 pm, et | No rate changes | Important. Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting. |
| Weekly Jobless Claims | Thursday, Feb. 1, 8:30 am, et | 230K | Important. An indication of employment. Higher claims may result in lower rates. |
| Preliminary Q4 Productivity | Thursday, Feb. 1, :30 am, et | Up 0.3% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| Employment | Friday, Feb. 2, 8:30 am, et | 4.1%, Payrolls +150k | Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
| Factory Orders | Friday, Feb. 2, 10:00 am, et | Up 1.3% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
SLOWER GROWTH
Mortgage interest rates got a slight reprieve Friday morning from the recent upward trend as Q4 gross domestic product came in slower than expected. GDP rose 2.6% versus the expected 3.0% increase. Growth took a hit from a larger trade deficit. Consumer spending was strong but the trade deficit widened as imports increased 13.9% which offset the solid 6.9% export increase. The data supports a Fed rate hike later rather than sooner but GDP will be revised a few times before the March Fed meeting so a hike is still expected by most analysts.
