![Mortgage Investors Group in [Dynamic1]](../assets/images/mortgage-investors-group.svg)
Market Comment
Mortgage bond prices finished the week near unchanged which held rates relatively steady. Most of the daily movements were within a narrow range which was a change from the past few weeks and months of large up and down swings. The data was very mixed but the lower-than-expected inflation reading helped keep things calm. Core PCE inflation rose 0.1% vs 0.2%. Housing starts were 1.56M vs the expected 1.36M. Consumer confidence was 110.7 vs 104. Leading Economic Indicators fell 0.5% vs 0.4%. Weekly jobless claims were 205K vs 215K. Final Q3 GDP came in at 4.9% vs 5.2%. New home sales were 590K vs 689K. Consumer sentiment was 69.7 vs 69.4. Durable goods rose 5.4% vs 2.2%. Income rose 0.4% as expected. Spending rose 0.2% vs 0.3%. Mortgage interest rates finished the week unchanged to worse by approximately 1/8 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| FHFA House Price Index | Tuesday, Dec. 26, 10:00 am, et |
Up 0.6% | Moderately Important. A measure of single-family house prices. Weakness may lead to lower rates. |
| Weekly Jobless Claims | Thursday, Dec. 28, 8:30 am, et |
205K | Important. An indication of employment. Higher claims may result in lower rates. |
Disparity
The 10 and 30-year Treasury bond yields are often viewed as “benchmarks”, reflecting the overall state of interest rates in the US economy. Many people concerned about mortgage interest rates track these bonds as a barometer for mortgage interest rates. However, in reality the Treasury and mortgage markets trade independently.
The supply and demand characteristics of Treasury bonds and mortgage-backed securities (MBS) differ significantly. Treasury securities represent money needed to fund the operations of the US government. MBSs, on the other hand, represent borrowing by homeowners.
Information related to Treasury bonds is relatively easy to come by. Almost every major news medium reports changes. On the other hand, accurate mortgage interest rate information is difficult and costly to obtain.
In the absence of information directly related to the mortgage interest rate markets, Treasury information can be useful in that the bond market generally trends in the same direction. However, mortgage interest rates can vary significantly. In fact, many times the Treasuries will trade wildly while MBS only see minor price changes and vice versa. Last Monday mortgage-backed securities rose 2/32nd on the day while the 10-year Treasury fell 5/32nds and the 30-year Treasury fell 20/32nds at that time. This is a prime example where anyone that looked solely at Treasuries thought the mortgage market worsened when in reality it held relatively steady.
The data provides a valuable lesson into the differences between treasury bonds and mortgage-backed securities. This is an example of why looking solely at treasuries can often mislead people. Keying in on the correct information can mean the difference between saving and losing a tremendous amount of money when making float and lock decisions.
