![Mortgage Investors Group in [Dynamic1]](../assets/images/mortgage-investors-group.svg)
Market Comment
Mortgage bond prices finished the week sharply lower which put upward pressure on rates. Rates worsened most of the week with only a slight reprieve toward the end. The IMF released a report on debt risks. They noted, “Global public debt is elevated. It is projected to exceed US$100 trillion in 2024 and will rise over the medium term” and warned, “risks to the debt outlook are heavily tilted to the upside.” The U.S. is well-suited to weather these risks but is not immune to the consequences of higher debt issuance. The data was mixed. LEI decreased 0.5% vs the expected 0.3% decrease. Existing home sales were 3.84M vs 3.9M. Jobless claims were 227K vs 242K. New home sales were 738K vs 720K. Durable goods fell 0.8% vs the expected 1% decline. Mortgage interest rates finished the week worse by approximately 5/8 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
|---|---|---|---|
| FHFA House Price Index | Tuesday, Oct. 29, 10:00 am, et | Up 0.1% | Moderately Important. A measure of single-family house prices. Weakness may lead to lower rates. |
| Consumer Confidence | Tuesday, Oct. 29, 10:00 am, et | 98.8 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| ADP Employment | Wednesday, Oct. 30, 8:15 am, et | 120K | Important. An indication of employment. Weakness may bring lower rates. |
| Q3 GDP | Wednesday, Oct. 30, 8:30 am, et | Up 3% | Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| Personal Income and Outlays | Thursday, Oct. 31, 8:30 am, et | Up 0.4%, Up 0.3% | Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| PCE Core Inflation | Thursday, Oct. 31, 8:30 am, et | Up 0.1% | Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve. |
| Q3 Employment Cost Index | Thursday, Oct. 31, 8:30 am, et | Up 1.1% | Very important. A measure of wage inflation. Weakness may lead to lower rates. |
| Employment | Friday, Nov. 1, 8:30 am, et | 4.1%, Payrolls +140K | Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
Uncertainties
Recent headlines weigh heavily on economies around the globe and mortgage rates at home. War in the Middle East and Ukraine, tensions in Taiwan, uncertainty with US politics, and varied signals from the US economy are just a few of the recent topics that dominate headlines.
Mortgage-backed securities often benefit when these types of stories hit the press. Fear, real or perceived, is a strong emotion. Investors run for safety, MBS prices rise, and mortgage interest rates fall. We have seen a lot of this flight to quality buying over time. The bad side of this story is when these trades unwind as we saw at times this month. Mortgage rates go from a lull to spiking wildly higher on some trading days.
Time will tell if the recent increase in volatility will continue. Lower rates are not a given in the short-term. However, the Fed does project Core PCE inflation to fall from 2.6 to 2.2 in 2025. The safe thing to do is to take advantage of mortgage interest rates at current levels and adjust in the future if the Fed projections are correct and inflation falls.
