MIG Market Watch, September 26th, 2022
Posted by : Admin
Market Comment
Mortgage bond prices finished the week significantly lower which put upward pressure on rates. We started on a negative note ahead of the Fed meeting and only saw a slight reprieve from the selling pressure at pricing Wednesday morning. The Fed raised rates 75 basis points as expected and estimated additional rate hikes were likely into the end of the year and beyond. Fed projections for the Fed Funds Rate were 4.4% by the end of 2022 and 4.6% by the end of 2023. Chair Powell indicated price stability is the “bedrock” of the economy and that the Fed will take a restrictive stance for some time to eventually get inflation to their 2% target. The data varied but was overshadowed by inflation fears. Housing starts were 1575K vs 1420K. Existing home sales were 4.8M vs 4.73M. Weekly jobless claims were 213K vs 215K. Mortgage interest rates finished the week worse by over a full discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Durable Goods Orders | Tuesday, Sept. 27, 8:30 am, et |
Up 0.2% | Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
| FHFA House Price Index | Tuesday, Sept. 27, 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, Sept. 27, 10:00 am, et |
104.0 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| New Home Sales | Tuesday, Sept. 27, 10:00 am, et |
499K | Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
| Q2 GDP | Thursday, Sept. 29, 8:30 am, et |
Down 0.6% | Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| Personal Income and Outlays | Friday, Sept. 30, 8:30 am, et |
Up 0.3%, Up 0.2% |
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| PCE Core Inflation | Friday, Sept. 30, 8:30 am, et |
Up 0.4% | Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve. |
| U of Michigan Consumer Sentiment | Friday, Sept. 30, 10:00 am, et |
59.5 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
PCE
The US Department of Commerce’s Bureau of Economic Analysis releases the core PCE price index. The report provides the average increase in costs for personal consumption expenditures. PCE is significant in that the Fed uses it in determining inflation as opposed to the prior use of the consumer price index. The PCE includes the price of spending for and on behalf of households. This includes health care spending paid for a household by a business. The CPI only reflects out of pocket expenses paid directly by consumers. The Fed continues to state that getting inflation in check is their primary concern.
Be cautious heading into the release. Data can surprise the financial markets from time to time. Mortgage interest rates will likely spike higher in the short term if the PCE core reading is higher than expected. A reading in line with expectations will likely help rates stay in check.
