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Market
Comment
Mortgage bond prices finished the week sharply higher which put significant downward pressure on rates. Rates improved considerably Tuesday in response to a possible Middle East resolution. Both stocks and bonds rallied in response. Oil prices fell to the lowest level in approximately six weeks. We finished the week with some additional rate improvements Friday morning. FHFA housing rose 0.1% as expected. Consumer confidence was 93.1 vs 92. Durable goods orders rose 7.9% vs 3.5%. Income was unchanged vs up 0.4%. Spending rose 0.5% as expected. GDP rose 1.6% vs 2%. Core PCE prices rose 0.2% vs 0.3%. Weekly jobless claims were 215K vs 211K. Mortgage interest rates finished the week better by approximately 5/8 of a discount point.
LOOKING
AHEAD
|
Economic
Indicator |
Release
Date &
Time |
Consensus
Estimate |
Analysis
|
|
ISM Index |
Monday, June 1,
10:00 am, et
|
52.6
|
Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
|
| Construction Spending |
Monday, June 1,
10:00 am, et
|
Up 0.4%
|
Low importance. An indication of economic strength. Significant weakness may lead to lower rates.
|
| JOLTS Job Openings |
Tuesday, June 2,
10:00 am, et
|
6.8M
|
Important. An indication of employment. A weaker figure may result in lower mortgage rates.
|
| ADP Employment |
Wednesday, June 3,
8:30 am, et
|
110K
|
Important. An indication of employment. Weakness may bring lower rates.
|
| Factory Orders |
Wednesday, June 3,
10:00 am, et
|
Up 3.5%
|
Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
|
| Fed “Beige Book” |
Wednesday, June 3,
2:00 pm, et
|
None
|
Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates.
|
| Preliminary Q1 Productivity |
Thursday, June 4,
8:30 am, et
|
Up 0.8%
|
Important. A measure of output per hour. Improvement may lead to lower mortgage rates.
|
| Employment |
Friday, June 5,
8:30 am, et
|
4.3%,
Payrolls +96K
|
Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
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Tame Inflation
According to the Bureau of Economic Analysis, “The PCE Price Index Excluding Food and Energy, also known as the core PCE price index, is released as part of the monthly Personal Income and Outlays report. The core index makes it easier to see the underlying inflation trend by excluding two categories – food and energy – where prices tend to swing up and down more dramatically and more often than other prices. The core PCE price index is closely watched by the Federal Reserve as it conducts monetary policy.”
The Fed wants to see that their current rate stance has pushed back inflationary pressures. Tame inflation readings alleviate price pressures on MBSs. Last week’s Core PCE release showed a lower than expected increase. The report shifted sentiment in the short term as some recent headlines warned of a possible Fed rate hike this year. Traders are now optimistic that the Fed will win the inflation fight. However, The Fed is clear they will err on the side of keeping rates higher for longer rather than cutting too soon. A cautious approach to float/lock decisions is prudent.
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