MIG Market Watch, January 23rd, 2023
Market Comment

Mortgage bond prices finished the week near unchanged which held rates flat. However, there was considerable volatility throughout the week. Rates worsened Monday morning, bounced back Tuesday, and finished the week trading back and forth. The data was generally solid with very little price pressures. NAHB housing was 35 vs 31. Industrial production fell 0.7% vs the expected 0.1% decline. Capacity use was 78.8% vs 79.6%. Producer prices fell 0.5% vs the expected 0.1% decline. The core, which excludes volatile food and energy, rose 0.1% as expected. Retail sales fell 1.1% vs the expected 0.8% decline. Weekly jobless claims were 190K vs 212K. The Philadelphia Fed index fell 8.9 vs the expected 11.0 decline. Mortgage interest rates finished the week with discount points near unchanged.

Looking Ahead
Economic Indicator Release Date & Time Consensus Estimate Analysis
Leading Economic Indicators Monday, Jan. 23,
10:00 am, et
Down 0.7% Important. An indication of future economic activity. Weakness may lead to lower rates.
Durable Goods Orders Thursday, Jan. 26,
8:30 am, et
Up 2.5% Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.
Q4 GDP Thursday, Jan. 26,
8:30 am, et
Up 2.8% Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
Weekly Jobless Claims Thursday, Jan. 26,
8:30 am, et
202K Important. An indication of employment. Higher claims may result in lower rates.
New Home Sales Thursday, Jan. 26,
10:00 am, et
618K Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
Personal Income and Outlays Friday, Jan. 27,
8:30 am, et
Up 0.2%,
Down 0.1%
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
PCE Core Inflation Friday, Jan. 27,
8:30 am, et
Up 0.2% Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.
U of Michigan Consumer Sentiment Friday, Jan. 27,
10:00 am, et
64.6 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Fed Vice Chair

Vice Chair Lael Brainard released a speech last week titled, “Staying the Course to Bring Inflation Down”. Brainard indicated, “Inflation has declined in recent months, which is important for American households, businesses, and consumers. Inflation is high, and it will take time and resolve to get it back down to 2 percent. We are determined to stay the course.”

She continued, “Although financial conditions adjust immediately to reflect expected and actual changes in monetary policy, the full adjustment of output, employment, and inflation occurs with a lag. Given the speed and magnitude of the swing in the stance of monetary policy, the lagged effects of earlier accommodation likely offset some of the initial effects of tightening over the course of 2022, and it is likely that the full effect on demand, employment, and inflation of the cumulative tightening that is in the pipeline still lies ahead.”

She concluded, “Even with the recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time to make sure inflation returns to 2 percent on a sustained basis.”