Market Comment
Mortgage bond prices finished the week near unchanged which kept rates in check. We traded in positive territory most of the week amid weaker than expected data. Unfortunately, we ended the week on a sour note as a strong payrolls report erased most of the earlier gains. The rest of the data was mixed. ISM Index came in at 48.7 vs 49.6. Factory orders rose 0.7% vs 0.6%. ADP employment came in at 152K vs 175K. Weekly jobless claims were 229K vs 220K. The trade deficit was $74.6B vs $76.1B. Mortgage interest rates finished the week with discount points near unchanged.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
|---|---|---|---|
| 3-year Treasury Note Auction | Monday, June 10, 1:15 pm, et | None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| 10-year Treasury Note Auction | Tuesday, June 11, 1:15 pm, et | None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Consumer Price Index | Wednesday, June 12, 8:30 am, et | Up 0.2%, Core up 0.3% | Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates. |
| Fed Meeting Adjourns | Wednesday, June 12, 2:15 pm, et | No rate changes | Important. Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting. |
| Producer Price Index | Thursday, June 13, 8:30 am, et | Up 0.2%, Core up 0.3% | Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates. |
| 30Y Treasury Bond Auction | Thursday, June 13, 1:15 pm, et | None | Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates. |
| U of Michigan Consumer Sentiment | Friday, June 14, 10:00 am, et | 73 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
No Pivot in Sight
The Fed is clear they will not pivot from keeping rates higher until the data shows signs the rate hikes are working. The US Bureau of Labor Statistics Employment Situation Summary is the most important economic release each month. Last week’s report pushed back against the argument the Fed will pivot any time soon.
The household survey indicated, “Both the unemployment rate, at 4.0 percent, and the number of unemployed people, at 6.6 million, changed little in May. A year earlier, the jobless rate was 3.7 percent, and the number of unemployed people was 6.1 million.”
The establishment survey reported, “Total nonfarm payroll employment increased by 272,000 in May, higher than the average monthly gain of 232,000 over the prior 12 months. In May, employment continued to trend up in several industries, led by health care; government; leisure and hospitality; and professional, scientific, and technical services.”
The surge in the payrolls component gained most of the focus and caused mortgage interest rates to push sharply higher Friday morning. If future economic releases show economic weakness we could see the recent upward trend reverse. However, any additional signs of strength will likely result in volatility. A cautious approach to float/lock decisions is prudent in the weeks and months ahead.
