![Mortgage Investors Group in [Dynamic1]](../assets/images/mortgage-investors-group.svg)
Market Comment
Mortgage bond prices finished the week lower which put additional upward pressure on rates. Rates were steady the beginning of the week but pushed higher Wednesday in response to the Fed meeting. The Fed left rates unchanged, announced additional tapering of MBS purchases in February, said asset purchases will cease in March, and prepped the market for a rate hike in March. Heavy selling pressure ensued as inflation fears remained heightened. The data was mixed. FHFA Housing rose 1.1% as expected. Consumer confidence was 113.8 vs 110. New home sales were 811K vs 750K. Personal income rose 0.3% vs 0.4%. Spending fell 0.6% vs down 0.8%. PCE inflation rose 0.4% as expected. Employment cost index rose 1% vs 1.2%. Consumer sentiment was 67.2 vs 68.5. Mortgage interest rates finished the week worse by approximately 1/4 to 3/8 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| ISM Index | Tuesday, Feb. 1, 10:00 am, et |
58.3 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Construction Spending | Tuesday, Feb. 1, 10:00 am, et |
Up 0.7% | Low importance. An indication of economic strength. Significant weakness may lead to lower rates. |
| ADP Employment | Wednesday, Feb. 2, 8:30 am, et |
250K | Important. An indication of employment. Weakness may bring lower rates. |
| Weekly Jobless Claims | Thursday, Feb. 3, 8:30 am, et |
200K | Important. An indication of employment. Higher claims may result in lower rates. |
| Preliminary Q4 Productivity | Thursday, Feb. 3, 8:30 am, et |
Up 2.8% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| Factory Orders | Thursday, Feb. 3, 10:00 am, et |
Up 0.3% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Employment | Friday, Feb. 4, 8:30 am, et |
3.9%, Payrolls +233K |
Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
Fed Guidance
The Federal Open Market Committee provided information regarding its planned approach for significantly reducing the size of the Federal Reserve’s balance sheet. “The Committee views changes in the target range for the federal funds rate as its primary means of adjusting the stance of monetary policy.” They will “determine the timing and pace of reducing the size of the Federal Reserve’s balance sheet so as to promote its maximum employment and price stability goals.” The Fed “expects that reducing the size of the balance sheet will commence after the process of increasing the target range for the federal funds rate has begun.” They “intend to reduce securities holdings over time in a predictable manner primarily by adjusting the amounts reinvested of principal payments received from securities held in the System Open Market Account (SOMA). Over time, the Committee intends to maintain securities holdings in amounts needed to implement monetary policy efficiently and effectively in its ample reserves regime. In the longer run, the Committee intends to hold primarily Treasury securities in the SOMA, thereby minimizing the effect of Federal Reserve holdings on the allocation of credit across sectors of the economy. The Committee is prepared to adjust any of the details of its approach to reducing the size of the balance sheet in light of economic and financial developments.”
