Market Comment
Mortgage bond prices finished the week slightly lower which put a little upward pressure on rates. We started the week on a steady note Monday. Unfortunately, sentiment turned sour mid-week as inflation fears dominated headlines. A report that many of the recent Fortune 500 earnings calls expressed inflation concerns led to short-term spikes in rates. We rebounded Thursday afternoon and into Friday morning as the Fed multi-billion-dollar MBS purchases helped counter the earlier negative movements. The data was mixed. Durable goods orders rose 0.5% vs the expected 2.5% increase. Consumer confidence was 121.7 vs the expected 115. GDP rose 6.4% vs the expected 6.2% increase. Weekly jobless claims were 553K vs the expected 535K. The Fed left rates unchanged and indicated the MBS purchases will continue. Mortgage interest rates finished the week worse by approximately 1/8 of a discount point despite all the volatility.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| ISM Index | Monday, May 3, 10:00 am, et |
64.9 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Construction Spending | Monday, May 3, 10:00 am, et |
Up 2.1% | Low importance. An indication of economic strength. Significant weakness may lead to lower rates. |
| Trade Data | Tuesday, May 4, 8:30 am, et |
$72B deficit | Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| Factory Orders | Tuesday, May 4, 10:00 am, et |
Up 2.0% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| ADP Employment | Wednesday, May 5, 8:30 am, et |
750K | Important. An indication of employment. Weakness may bring lower rates. |
| Weekly Jobless Claims | Thursday, May 6, 8:30 am, et |
655K | Important. An indication of employment. Higher claims may result in lower rates. |
| Preliminary Q1 Productivity | Thursday, May 6, 8:30 am, et |
Down 2.8% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| Employment | Friday, May 7, 8:30 am, et |
5.8%, Payrolls +925K |
Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
| Consumer Credit | Friday, May 7, 3:00 pm, et |
$5B | Low importance. A significantly large increase may lead to lower mortgage interest rates. |
GDP
According to the Bureau of Economic Research, “Real gross domestic product (GDP) increased at an annual rate of 6.4 percent in the first quarter of 2021, reflecting the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic. In the first quarter, government assistance payments, such as direct economic impact payments, expanded unemployment benefits, and Paycheck Protection Program loans, were distributed to households and businesses through the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act. In the fourth quarter of 2020, real GDP increased 4.3 percent.”
