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Market
Comment
Mortgage bond prices finished the week slightly lower which put a little upward pressure on rates. Rates improved slightly to start the week but turned direction after the Fed Chair’s press conference. The Fed cut rates 25 basis points as expected but market participants became skeptical of additional monetary easing through 2025. The U.S. data continued to be delayed due to the government shutdown. The House Price index rose 0.4% vs 0.1%. Consumer confidence was 94.6 vs 93.2. Mortgage interest rates finished the week with discount points worse by approximately 1/8 of a discount point.
LOOKING
AHEAD
|
Economic
Indicator |
Release
Date &
Time |
Consensus
Estimate |
Analysis
|
|
ISM Index
|
Monday, Nov. 3,
10:00 am, et
|
52.2
|
Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
|
| Construction Spending |
Monday, Nov. 3,
10:00 am, et
|
Down 0.1%
|
Low importance. An indication of economic strength. Significant weakness may lead to lower rates.
|
| Trade Data |
Tuesday, Nov. 4,
8:30 am, et
|
$60.4B deficit
|
Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
|
| Factory Orders |
Tuesday, Nov. 4,
10:00 am, et
|
Up 1.4%
|
Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
|
| ADP Employment |
Wednesday, Nov. 5,
8:30 am, et
|
Down 45K
|
Important. An indication of employment. Weakness may bring lower rates.
|
| Preliminary Q3 Productivity |
Thursday, Nov. 6,
8:30 am, et
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Up 3.2%
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Important. A measure of output per hour. Improvement may lead to lower mortgage rates.
|
| Employment |
Friday, Nov. 7,
8:30 am, et
|
4.3%,
Payrolls +50K
|
Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
|
| U of Michigan Consumer Sentiment |
Friday, Nov. 7,
10:00 am, et
|
58.6
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Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
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Fed Uncertainty
The Fed cut rates last week however their forward guidance caused market jitters across stocks and bonds. Fed Chair Powell conveyed uncertainty regarding additional rate cuts by stating, “The Fed will now cut rates when it sees further progress on inflation.” He noted, “We’re not on any preset course” and “We’re going to react to data. That’s just the general sense of what the Committee thinks is likely to be appropriate.” The median participant projects that the appropriate level of the federal funds rate will be 3.9 percent at the end of next year and 3.4 percent at the end of 2026.
These statements tempered market expectations, leading to a pullback in bets for aggressive easing in 2025. The Fed remains in a precarious position of their dual mandate of maximum employment and 2% inflation. They cut rates to stimulate the economy but remain concerned that inflation is above their 2% target.
Mortgage interest rates are likely to track in this range unless the backlog of data is released and some of it shows inflationary pressures.
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