![Mortgage Investors Group in [Dynamic1]](../assets/images/mortgage-investors-group.svg)
Market Comment
Mortgage bond prices finished the week a little better amid considerable volatility. We started on a positive, saw some selling pressure Thursday morning through early Friday morning, and then stabilized. Inflation fears dominated trading, but fears of economic recession also factored into market sentiment. Oil and gas prices remained volatile as the Russia/Ukraine war continued and Russia stopped gas to NATO members Bulgaria and Poland. The data was mixed. Durable goods orders rose 0.8% vs 1.3%. New home sales were 763K vs 730K. Confidence was 107.3 vs 105. Q1 GDP fell 1.4% vs the expected 1.2% increase. Income rose 0.5% vs 0.4%. Spending rose 1.1% vs 0.6%. Core PCE Inflation rose 0.3% vs 0.4%. Employment Cost Index rose 1.4% vs 1.2%. The Fed continued their MBS reinvestments. Mortgage interest rates finished the week better by approximately 1/4 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| ISM Index | Monday, May 2, 10:00 am, et |
58 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Factory Orders | Tuesday, May 3, 10:00 am, et |
Up 1.1% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| ADP Employment | Wednesday, May 4, 8:30 am, et |
370K | Important. An indication of employment. Weakness may bring lower rates. |
| Trade Data | Wednesday, May 4, 8:30 am, et |
$86.9B deficit | Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| Fed Meeting Adjourns | Wednesday, May 4, 2:15 pm, et |
50 basis point hike | Important. Most expect the Fed to raise rates. Volatility may surround the adjournment of this meeting. |
| Weekly Jobless Claims | Thursday, May 5, 8:30 am, et |
225K | Important. An indication of employment. Higher claims may result in lower rates. |
| Preliminary Q1 Productivity | Thursday, May 5, 8:30 am, et |
Down 2.1% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| Employment | Friday, May 6, 8:30 am, et |
3.6%, Payrolls +400K |
Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
The Fed
The Federal Reserve meets this week and is expected to raise rates 50 basis points. Financial markets currently price in a 100% chance of the hike this week and an 85% chance of another hike at the June meeting. Many analysts strongly believe there will be continued rate hikes through the year. The one thing this week’s meeting could bring is additional insight into other Fed moves beside rate hikes. Many economists predict the Fed will announce details of their balance sheet reductions. This means they will stop reinvesting in mortgage-backed securities to push rates higher. This isn’t a huge surprise as Fed officials continue to be clear in their intentions. The challenge they face is the fact that higher rates hurt the housing market and housing is a vital component of the economy.
Be cautious this week as mortgage interest rates are likely to be volatile.
