![Mortgage Investors Group in [Dynamic1]](../assets/images/mortgage-investors-group.svg)
Market Comment
Mortgage bond prices finished the week near unchanged which kept rates in check. Trading was thin on both sides of the holiday Wednesday. Prices were volatile but moved within tight ranges. Buyers emerged early in the week which helped rates improve slightly. FHFA housing rose 0.4% vs 0.5% which set the tone for the positive moves. Unfortunately, those gains were erased Thursday and Friday after stronger than expected data both mornings. Weekly jobless claims were 211K vs 222K. ISM Index was 49.3 vs 48.4. Mortgage interest rates finished the week with discount points near unchanged.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
|---|---|---|---|
| Factory Orders | Monday, Jan. 6, 10:00 am, et | Down 0.3% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Trade Data | Tuesday, Jan. 7, 8:30 am, et | $77.5B deficit | Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| ADP Employment | Wednesday, Jan. 8, 8:30 am, et | 143K | Important. An indication of employment. Weakness may bring lower rates. |
| Fed Minutes | Wednesday, Jan. 8, 2:00 pm, et | None | Important. Details of the last Fed meeting will be thoroughly analyzed. |
| Weekly Jobless Claims | Thursday, Jan. 9, 8:30 am, et | 215K | Important. An indication of employment. Higher claims may result in lower rates. |
| Employment | Friday, Jan. 10, 8:30 am, et | 4.2%, Payrolls +150K | Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
| U of Michigan Consumer Sentiment | Friday, Jan. 10, 10:00 am, et | 74.5 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Year Ahead
The future of the economy will continue to be debated. Stocks posted heavy gains for 2024 but ended on a down note. The recent data, Fed statements, and Fed press conferences signal the possibility of two rate cuts some time in 2025. The biggest concerns remain inflation, economic recovery, and terrorist attacks.
The next Federal Reserve meeting is the end of January. The current odds of a Fed cut at that meeting are less than 12%. The majority see a 25-basis point cut sometime before summer. 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 $2.2 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 three 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.
