MARKET COMMENT
Mortgage bond prices finished the week higher which kept rates in check. Rates fell the first portion of the week amid tame consumer inflation data. Consumer prices rose 0.2% as expected. The Core, which excludes volatile food and energy prices, rose 0.2% as expected. Retail sales fell 0.1%. Analysts expected an increase of 0.3%. Producer prices rose 0.2% versus the expected 0.1% increase. Weekly jobless claims were 226K as expected. Housing starts were 1236k versus the expected 1290K. There was some upward pressure on rates early Friday morning amid some solid data. Industrial production rose 1.1% versus the expected 0.3% increase. Capacity use was 78.1% versus the expected 77.5%. Consumer sentiment was 102 versus the expected 99.5. We ended the week better by approximately 1/8 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Existing Home Sales | Wednesday, March 21, 10:00 am, et | 5.4M | Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates. |
| Fed Meeting Adjourns | Wednesday, March 21, 2:15 pm, et | Rate hike Expected | Important. Most expect the Fed to change rates. Volatility may surround the adjournment of this meeting. |
| Weekly Jobless Claims | Thursday, March 22, 8:30 am, et | 228K | Important. An indication of employment. Higher claims may result in lower rates. |
| FHFA House Price Index | Thursday, March 22, 10:00 am, et | Up 0.5% | Moderately Important. A measure of single family house prices. Weakness may lead to lower rates. |
| Leading Economic Indicators | Thursday, March 22, 10:00 am, et | Up 1.2% | Important. An indication of future economic activity. A smaller increase may lead to lower rates. |
| 10-year Treasury TIPS Auction | Thursday, March 22, 1:15 pm, et | None | Important. TIPS will be auctioned. Strong demand may lead to lower mortgage rates. |
| Durable Goods Orders | Friday, March 23, 8:30 am, et | Up 0.2% | Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
| New Home Sales | Friday, March 23, 10:00 am, et | 603K | Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
WILL THEY OR WON’T THEY?
The Fed has primed everyone the past few weeks for a rate hike at their March 21st meeting. There was a 50% chance of a March increase at the beginning of the year. That figure increased to 75% by February and above 85% by the beginning of March.
Most analysts point to the solid employment report as the impetus for the Fed move. Signs of continued employment strength will likely result in action from the Fed in the meetings ahead.
The Fed’s schedule the remainder of the year includes meetings May 2, June 13, August 18, September 26, November 8, and December 19. Right now the odds of another Fed rate hike in June are in excess of 75%. The odds of whether or not the rate increases continue into September currently hover around 50%.
Now is a great time to take advantage of still historically favorable rates to avoid future volatility.
