![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 is typical surrounding holidays and shortened trading sessions. Rates improved slightly Tuesday morning amid no data. Trading was flat mid-week. We ended the week and the year on a slightly negative note with some weakness Thursday afternoon and Friday. There were only two economic releases. FHFA housing rose 0.3% vs 0.4%. Weekly Jobless claims were 218K vs 210K. Mortgage interest rates finished the week unchanged to better by approximately 1/8 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Construction Spending | Tuesday, Jan. 2, 10:00 am, et |
Up 0.5% | Low importance. An indication of economic strength. Significant weakness may lead to lower rates. |
| ISM Index | Wednesday, Jan. 3, 10:00 am, et |
47.1 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Fed Minutes | Wednesday, Jan. 3, 2:00 pm, et |
None | Important. Details of the last Fed meeting will be thoroughly analyzed. |
| ADP Employment | Thursday, Jan. 4, 8:15 am, et |
100K | Important. An indication of employment. Weakness may bring lower rates. |
| Weekly Jobless Claims | Thursday, Jan. 4, 8:30 am, et |
205K | Important. An indication of employment. Higher claims may result in lower rates. |
| Employment | Friday, Jan. 5, 8:30 am, et |
3.9%, Payrolls +158K |
Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
| Factory Orders | Friday, Jan. 5, 10:00 am, et |
Up 1.5% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
Year Ahead
The future of the economy will continue to be debated. Stocks posted heavy gains to end 2023 and mortgage rates came off the highs seen earlier in the year. The recent data, Fed statements, and Fed press conferences signal the possibility of rate cuts sometime in 2024. The biggest concerns remain inflation, economic recovery, and viral variants.
The next Federal Reserve meeting is the end of January. The current odds of a Fed pivot at that meeting are less than 15%. The majority see a 25-basis point cut starting at the March 20th meeting. However, a lot can change between now and then and there are several significant economic releases that will impact that decision. The most important being the employment report each month. The release this week will likely set the tone for rates going forward.
Another positive is the fact the Fed continues to hold in excess of $2.4 trillion of mortgage-backed securities which has kept mortgage rates lower than they would be otherwise. Fed Chair Powell has provided no indication they plan to begin selling anytime soon despite stating the past two years that it is something they will eventually do.
The Fed remains “data-dependent” so the possibility for future rate volatility remains high. Be especially cautious heading into data.
