![Mortgage Investors Group in [Dynamic1]](../assets/images/mortgage-investors-group.svg)
Market Comment
Mortgage bond prices finished the week sharply lower which put continued upward pressure on rates. Rates worsened to start the week, bounced back a bit mid-week, sold off again, then rallied around the employment report Friday morning. The IMF released a report on debt risks. The data was mixed. FHFA Housing rose 0.3% vs 0.2%. Consumer confidence was 108.7 vs 99.5. ADP employment rose 233K vs 115K. However, GDP rose 2.8% vs 3%. Weekly jobless claims were 216K vs 230K. Personal Income rose 0.3% as expected. Spending was up 0.5% vs 0.4%. Core PCE inflation rose 2.7% vs 2.6%. The employment cost index rose 0.8% vs 0.9%. Unemployment was 4.1% as expected. Non-farm payrolls were 12K vs 113K. Mortgage interest rates finished the week worse by approximately 1/2 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
|---|---|---|---|
| Factory Orders | Monday, Nov. 4, 10:00 am, et | Down 0.4% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Trade Data | Tuesday, Nov. 5, 8:30 am, et | $72B deficit | Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| 10-year Treasury Note Auction | Tuesday, Nov. 5, 1:15 pm, et | None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| 30-year Treasury Bond Auction | Wednesday, Nov. 6, 1:15 pm, et | None | Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates. |
| Preliminary Q3 Productivity | Thursday, Nov. 7, 8:30 am, et | Up 2.3% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| Fed Meeting Adjourns | Thursday, Nov. 7, 2:15 pm, et | 25 basis point cut | Important. Most expect the Fed to cut rates. Volatility may surround the adjournment of this meeting. |
| Consumer Credit | Thursday, Nov. 7, 3:00 pm, et | $12B | Low importance. A significant increase may lead to lower mortgage interest rates. |
| U of Michigan Consumer Sentiment | Friday, Nov. 8, 10:00 am, et | 70 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Fed Meeting
The Federal Reserve is expected to continue to cut rates at the meeting this week. The majority of analysts expect a 25 basis point cut when they announce their decision Thursday afternoon. Their statement and the Fed Chair’s post-meeting press conference will drive the direction of trading in the short term.
Remember, the Fed does not directly dictate mortgage interest rates. The last Fed meeting saw a 50 basis point cut and mortgages rates improved that day but rose considerably since then. The Fed cuts rates to spur the economy. This often is a benefit for stocks and comes at the expense of bonds. Fixed income investments are also impacted by inflationary fears, government spending, debt issuance, and other factors beyond the Fed. The Fed does drive the general direction of rates with their monetary policy, but there is often considerable volatility as they work toward their targets. As we continue to state, 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.
