MIG Market Watch, March 27th, 2023
Posted by : Admin
Market Comment
Mortgage bond prices finished the week near unchanged despite significant market volatility. We saw heavy selling early in the week in anticipation of the Fed rate hike. The Fed hiked rates 25 basis points as expected. Trading rebounded later in the week in response to the Fed’s wording (see below.) The data was mixed. Existing home sales rose 14.5% vs 5%. Consumer sentiment was 63.4 vs 67. Weekly jobless claims were 191K vs 193K. New home sales were 640K vs 650K. Durable goods orders fell 1% vs the expected 0.6% increase. Mortgage interest rates finished the week better by approximately 1/8 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Trade Data | Tuesday, March 28, 8:30 am, et |
Down 0.7% | $91.5B deficit Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| FHFA House Price Index | Tuesday, March 28, 10:00 am, et |
Down 0.1% | Moderately Important. A measure of single-family house prices. Weakness may lead to lower rates. |
| Consumer Confidence | Tuesday, March 28, 10:00 am, et |
102.9 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| Weekly Jobless Claims | Thursday, March 30, 8:30 am, et |
192K | Important. An indication of employment. Higher claims may result in lower rates. |
| Q4 GDP | Thursday, March 30, 8:30 am, et |
Up 3.2% | Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| Personal Income and Outlays | Friday, March 31, 8:30 am, et |
Up 0.6%, Up 1.8% |
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| PCE Core Inflation | Friday, March 31, 8:30 am, et |
Up 0.6% | Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve. |
| U of Michigan Consumer Sentiment | Friday, March 31, 10:00 am, et |
67 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Fed Guidance Revised
The Federal Reserve raised rates 25 basis points as expected last week. The big surprise was the rewording of their forward guidance from “ongoing increases will be needed” to “some may be needed.” Ten of eighteen members expect only one more rate hike this year. This resulted in a relief rally for mortgage-backed securities. Some analysts viewed this a signal that the Fed could actually change course and start cutting rates sometime this year. However, the Fed Chair quickly pushed back against that narrative with his post-meeting press conference in which he indicated no rate cuts were expected this year. Powell said the change in guidance was due to the anticipation that tightening credit would dampen inflation pressures. “It doesn’t all have to come from rate hikes,” Powell said. “It can come from tighter credit conditions.”
Mortgage interest rate swings are likely to continue. Be very cautious in these volatile times.
