MARKET COMMENT
Mortgage bond prices finished the week higher which put downward pressure on rates. We started the week on a positive note and held steady until the end. The Fed remained the dominant force with billion-dollar MBS purchases daily. Global financial markets were buoyed by reports of coronavirus vaccines with efficacy rates of 90% and above. The data was mixed. There was some weakness on the consumer front with retail sales up 0.3% vs the expected 0.5% increase. Production rose 1.1% vs 1.5% and capacity use was 72.8% vs 72.5%. Weekly jobless claims were 742K vs the expected 725K. The Philadelphia Fed report was 26.3 vs the expected 22. Existing home sales were 6.85M vs 6.5M. Mortgage interest rates finished the week better by approximately 1/4 to 3/8 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| FHFA House Price Index | Tuesday, Nov. 24, 10:00 am, et |
Up 1.4% | Moderately Important. A measure of single-family house prices. Weakness may lead to lower rates. |
| Consumer Confidence | Tuesday, Nov. 24, 10:00 am, et |
98.0 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| Durable Goods Orders | Wednesday, Nov. 25, 8:30 am, et |
Up 0.4% | Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
| PCE Core Inflation | Wednesday, Nov. 25, 8:30 am, et |
Up 0.1% | Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve. |
| Personal Income and Outlays | Wednesday, Nov. 25, 8:30 am, et |
Up 0.4%, Up 0.7% |
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| Weekly Jobless Claims | Wednesday, Nov. 25, 8:30 am, et |
742K | Important. An indication of employment. Higher claims may result in lower rates. |
| New Home Sales | Wednesday, Nov. 25, 10:00 am, et |
970K | Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
| U of Michigan Consumer Sentiment | Wednesday, Nov. 25, 10:00 am, et |
78.0 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Durable Goods Orders
Durable goods orders are generally believed to be a precursor of activity in the manufacturing sector because manufacturing must have an order before considering an increase in production. Conversely, a decrease in orders eventually causes production to be scaled back; otherwise, the manufacturer accumulates inventories, which must be financed. Unfortunately, durable goods order data has many drawbacks. The first problem with the order data is that they are extremely volatile. The volatility of the data usually is attributed to the civilian aircraft and defense components of the figure. For example, if Boeing has a big order for one of its jumbo jets, the civilian aircraft category can change by $3-4 billion. The same scenario is evident when an aircraft carrier is ordered, surges in the defense category result. The second problem with the data is that orders are continuously being revised. Be cautious heading into the data.
