![Mortgage Investors Group in [Dynamic1]](../assets/images/mortgage-investors-group.svg)
Market Comment
Mortgage bond prices finished the week higher which put downward pressure on rates. The front and back end of the week were negative with significant improvements mid-week. Rates were worse Monday morning in response to reports that BRICS countries dumped over $120B in U.S. Treasuries in 2023. MBS prices rebounded around tame inflation readings and a rate-friendly Fed meeting. CPI rose 0.1% vs 0%. The core rose 0.3% as expected. Producer prices were unchanged versus the expected 0.1% increase. The core was also unchanged versus up 0.2%. The rest of the data was mixed. Retail sales rose 0.3% vs the expected 0.1% decline. Weekly jobless claims were 202K vs 220K. Production fell 0.4% vs the expected 0.3% decrease. Capacity use was 78.8% vs 79.1%. Mortgage interest rates finished the week better by approximately 5/8 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| NAHB Housing Index | Monday, Dec. 18, 10:00 am, et |
36 | Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates. |
| Housing Starts | Tuesday, Dec. 19, 8:30 am, et |
1.36M | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Consumer Confidence | Wednesday, Dec. 20, 10:00 am, et |
104.3 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| Q3 GDP | Thursday, Dec. 21, 8:30 am, et |
Up 5.2% | Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| Philadelphia Fed Survey | Thursday, Dec. 21, 10:00 am, et |
-3 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Leading Economic Indicators | Thursday, Dec. 21, 10:00 am, et |
Down 0.4% | Important. An indication of future economic activity. Weakness may lead to lower rates. |
| PCE Core Inflation | Friday, Dec. 22, 8:30 am, et |
Up 0.2% | Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve. |
| Durable Goods Orders | Friday, Dec. 22, 8:30 am, et |
Up 2.1% | Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
Fed Outlook
The Federal Reserve appears ready to pivot on interest rates early next year and the financial markets moved lower in anticipation that inflation will fall in 2024. The mortgage-backed securities market improved significantly last week in response to the Fed release. The Fed kept rates unchanged but issued projections for next year. Some members anticipate the potential for 3 rate cuts starting possibly in March. The big uncertainty is when the pivot actually occurs. The other big issue is that the pivot will likely be slow and methodical. The most recent Fed projections predict a Fed Funds Rate range of 3.9% to 5.4% in 2024. That means that even among Fed members the outlook is varied. Fed Chair Powell and the official Fed release indicated they will remain data dependent. That means data releases in the weeks and months ahead will likely result in mortgage interest rate movements. The great news is that the recent trend has pushed mortgage interest rates lower. Be alert heading into economic releases. Strong data will likely cause rates to spike in the short term. Weaker data will generally support lower rates.
