![Mortgage Investors Group in [Dynamic1]](../assets/images/mortgage-investors-group.svg)
Market Comment
Mortgage bond prices finished the week near unchanged which left rates flat. Rates worsened the beginning of the week as inflation readings came in higher than expected. Fed Chair Powell told the US Congress that we are in a good place with the economy but that continued progress on inflation is necessary. MBS prices reversed course Wednesday afternoon and remained positive the rest of the week which erased the losses from Monday and Tuesday. The data was mixed. Weekly jobless claims were 213K vs 215K. Retail sales fell 0.9% vs the expected 0.1% decline. Industrial production rose 0.5% vs 0.3%. Capacity use was 77.8% vs 77.7%. Mortgage interest rates finished the week with discount points near unchanged.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
|---|---|---|---|
| NAHB Housing Index | Tuesday, Feb. 18, 10:00 am, et | 47 | Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates. |
| Housing Starts | Wednesday, Feb. 19, 8:30 am, et | 1.39M | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Fed Minutes | Wednesday, Feb. 19, 2:00 pm, et | None | Important. Details of the last Fed meeting will be thoroughly analyzed. |
| Weekly Jobless Claims | Thursday, Feb. 20, 8:30 am, et | 216K | Important. An indication of employment. Higher claims may result in lower rates. |
| Philadelphia Fed Survey | Thursday, Feb. 20, 10:00 am, et | 25.5 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Leading Economic Indicators | Thursday, Feb. 20, 10:00 am, et | Unchanged | Important. An indication of future economic activity. Weakness may lead to lower rates. |
| Existing Home Sales | Friday, Feb. 21, 10:00 am, et | 4.17M | Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates. |
| U of Michigan Consumer Sentiment | Friday, Feb. 21, 10:00 am, et | 67.8 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Inflation
Fears of inflation were heightened last week as some of the data showed price spikes. The consumer price index rose 0.5% vs the expected 0.3% reading. The core, which excludes volatile food and energy prices, rose 0.4% vs 0.3%. Producer prices increased 0.4% vs 0.3%. Core PPI rose 0.3% as expected. The 12-month CPI inflation reading rose 3.0% vs the prior reading of 2.9%. Year over year PPI rose 3.5% vs 3.2%. The U.S. Bureau of Labor Statistics reported, “Indexes that increased over the month include motor vehicle insurance, recreation, used cars and trucks, medical care, communication, and airline fares. The indexes for apparel, personal care, and household furnishings and operations were among the few major indexes that decreased in January.”
Inflation, real or perceived, erodes the value of fixed income investments such as mortgage-backed securities. The Fed’s goal for inflation is 2%. Future inflation readings will need to be tame for mortgage interest rates to push significantly lower. The Fed is confident they will eventually reach their goal but have provided clear guidance that it will take time. Be cautious in the short-term as financial markets remain volatile.
