MIG Market Watch, October 3rd, 2022
Posted by : Admin
Market Comment
Mortgage bond prices finished the week slightly positive which kept rates near unchanged to a little lower on the week. We started negatively Monday but turned positive Wednesday as the Bank of England intervened to resume debt purchases. This resulted in significant flight to safety buying of US debt instruments. Uncertainty surrounding inflation and the threat of economic slowdowns caused whipsaw trading. The data was mixed with higher than expected inflation readings at the end of the week. Durable goods orders fell 0.2% vs an expected 0.2% increase. FHFA housing fell 0.6% as expected. Consumer confidence was 108 vs 104.7. New home sales were 685K vs 510K. Second quarter GDP fell 0.6% as expected. Income rose 0.3% vs 0.2%. Spending rose 0.4% as expected. PCE core inflation rose 0.6% vs 0.4%. Mortgage interest rates finished the week better by approximately 1/8 to 1/4 of a discount point despite the volatility.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| ISM Index | Monday, Oct. 3, 10:00 am, et |
51.8 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Construction Spending | Monday, Oct. 3, 10:00 am, et |
Down 0.4% | Low importance. An indication of economic strength. Significant weakness may lead to lower rates. |
| Factory Orders | Tuesday, Oct. 4, 10:00 am, et |
Down 1.5% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| ADP Employment | Wednesday, Oct. 5, 8:30 am, et |
145K | Important. An indication of employment. Weakness may bring lower rates. |
| Trade Data | Wednesday, Oct. 5, 8:30 am, et |
$70.3B deficit | Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| Weekly Jobless Claims | Thursday, Oct. 6, 8:30 am, et |
195K | Important. An indication of employment. Higher claims may result in lower rates. |
| Employment | Friday, Oct. 7, 8:30 am, et |
3.7%, Payrolls +250K |
Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
| Consumer Credit | Friday, Oct. 7, 3:00 pm, et |
$24B | Low importance. A significantly large increase may lead to lower mortgage interest rates. |
A Sure Thing
Timing is one of the most important factors in success. Unfortunately, knowing the perfect time to lock in a loan is impossible until after the fact. While analysts constantly try to predict the future, the bottom line is they continually fall short in terms of accuracy. The Fed is a prime example of this. They constantly adjust inflation expectations and rate hikes and cuts accordingly.
The great news is that mortgage interest rates came off the earlier highs late last week. The rates today are a sure thing.
Floating is risky. The Fed is expected to continue to raise rate throughout the end of this year. Their MBS purchases have ceased for the time being. They are clear that they want to take a strong stance against inflation which means keeping rates elevated in the short-term. Caution is key.
