MIG Market Watch, November 20th, 2023
Market Comment

Mortgage bond prices finished the week higher which put downward pressure on rates. There were large swings both ways throughout the week. We started on a negative note Monday and then turned positive Tuesday in response to tame inflation readings. The back-and-forth trading continued the remainder of the week. Consumer prices were unchanged vs up 0.1%. The core, which excludes volatile food and energy prices, rose 0.2% vs 0.3%. Retail sales fell 0.1% vs down 0.3%. Producer prices fell 0.5% vs up 0.1%. The Core was unchanged vs up 0.3%. Philadelphia Fed was -5.9 vs -9. Production fell 0.6% vs the expected 0.3% decline. Capacity use was 78.9 vs 79.4. NAHB housing was 34 vs 40. Housing starts were 1372K vs 1370K. Mortgage interest rates finished the week better by approximately 3/4 of a discount point.

Looking Ahead
Economic Indicator Release Date & Time Consensus Estimate Analysis
Leading Economic Indicators Monday, Nov. 20,
10:00 am, et
Down 0.7% Important. An indication of future economic activity. Weakness may lead to lower rates.
20-year Treasury Bond Auction Monday, Nov. 20,
1:15 pm, et
None Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
Existing Home Sales Tuesday, Nov. 21,
10:00 am, et
3.93M Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
Fed Minutes Tuesday, Nov. 21,
2:00 pm, et
None Important. Details of the last Fed meeting will be thoroughly analyzed.
Weekly Jobless Claims Wednesday, Nov. 22,
8:30 am, et
225K Important. An indication of employment. Higher claims may result in lower rates.
Durable Goods Orders Wednesday, Nov. 22,
8:30 am, et
Down 3.0% Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment Wednesday, Nov. 22,
10:00 am, et
63 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Jobless Claims

The labor market began to show signs of cooling the beginning of the month with an increase in unemployment and a decrease in payrolls. Last week’s jobless claims added another sign that the Fed rate hikes are starting to show in the data. The Department of Labor reported, “In the week ending November 11, the advance figure for seasonally adjusted initial claims was 231,000, an increase of 13,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 217,000 to 218,000. The 4-week moving average was 220,250, an increase of 7,750 from the previous week’s revised average. The previous week’s average was revised up by 250 from 212,250 to 212,500.”

The release is significant in assessing the state of the labor market. The Department of Labor notes, “An initial claim is a claim filed by an unemployed individual after a separation from an employer. The claimant requests a determination of basic eligibility for the UI program. When an initial claim is filed with a state, certain programmatic activities take place and these result in activity counts including the count of initial claims. The count of U.S. initial claims for unemployment insurance is a leading economic indicator because it is an indication of emerging labor market conditions in the country. However, these are weekly administrative data which are difficult to seasonally adjust, making the series subject to some volatility.