MARKET COMMENT
Mortgage bond prices finished the week lower which put upward pressure on rates amid continued volatility. Rates were relatively stable the first portion of the week. That trend quickly evaporated in the wake of the Fed minutes which pointed to future rate hikes. Weekly jobless claims printed at 222K and continuing claims, a summation of all receiving benefits, at 1,875K. Analysts expected claims at 233K and continuing claims at 1.8M. Jobless claims have been below 300K for almost three years which is a sign the labor market is running very near full capacity. Leading economic indicators rose 1% versus the expected 0.8% increase. Stock volatility also factored into trading. We ended the week worse by approximately 1/8 to 1/4 of a discount point.
LOOKING AHEAD
Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
New Home Sales | Monday, Feb. 26, 10:00 am, et |
640K | Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
Durable Goods Orders | Tuesday, Feb. 27, 8:30 am, et |
Up 2.2% | Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
Consumer Confidence | Tuesday, Feb. 27, 10:00 am, et |
125 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Q4 Revised GDP | Wednesday, Feb. 28, 8:30 am, et |
Up 2.6% | Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
Personal Income and Outlays | Thursday, March 1, 8:30 am, et |
Up 0.3%, Up 0.1% |
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
PCE Core Inflation | Thursday, March 1, 8:30 am, et |
Up 0.2% | Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve. |
Weekly Jobless Claims | Thursday, March 1, 8:30 am, et |
222K | Important. An indication of employment. Higher claims may result in lower rates. |
ISM Index | Thursday, March 1, 10:00 am, et |
59 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
U of Michigan Consumer Sentiment | Friday, March 2, 10:00 am, et |
100 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
THE FED AND RATE HIKES
Fed “members agreed that the timing and size of future adjustments to the target range for the federal funds rate would depend on their assessments of realized and expected economic conditions relative to the Committee’s objectives of maximum employment and 2 percent inflation. They reiterated that this assessment would take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. Members expected that economic conditions would evolve in a manner that would warrant further gradual increases in the federal funds rate. Members agreed that the strengthening in the near-term economic outlook increased the likelihood that a gradual upward trajectory of the federal funds rate would be appropriate.”