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Market
Comment
Mortgage bond prices finished the week sharply lower which put upward pressure on rates. Trading volatility increased across all instruments. The data was mixed but did little to buffer the increased fear and anxiety in the financial markets. Consumer prices rose 0.3% as expected. The 0.2% core increase was in line with estimates. Housing starts were 1.487M vs 1.35M. Weekly jobless claims were 213K vs 215K. The trade deficit was $54.5B vs $66.6B. Personal income rose 0.4% vs 0.5%. Spending rose 0.4% vs 0.3%. Core PCE inflation rose 0.4% as expected. Durable goods orders were unchanged vs up 1.2%. GDP rose 0.7% vs 1.4%. Mortgage interest rates finished the week worse by approximately 1/2 to 5/8 of a discount point.
LOOKING
AHEAD
|
Economic
Indicator |
Release
Date &
Time |
Consensus
Estimate |
Analysis
|
| Industrial Production |
Monday, March 16,
9:15 am, et
|
Up 0.2%
|
Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates.
|
| Capacity Utilization |
Monday, March 16,
9:15 am, et
|
76.3%
|
Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates.
|
| NAHB Housing Index |
Monday, March 16,
10:00 am, et
|
37
|
Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates.
|
| Producer Price Index |
Wednesday, March 18,
8:30 am, et
|
Up 0.5%,
Core up 0.3%
|
Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates.
|
| Factory Orders |
Wednesday, March 18,
10:00 am, et
|
Up 0.4%
|
Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
|
| Fed Meeting Adjourns |
Wednesday, March 18,
2:15 pm, et
|
No rate changes
|
Important. Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting.
|
| Philadelphia Fed Survey |
Thursday, March 19,
10:00 am, et
|
15
|
Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
|
| New Home Sales |
Thursday, March 19,
10:00 am, et
|
725K
|
Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
|
War Uncertainty
The U.S. financial markets generally perform well in times of stability. The recent war in the Middle East has introduced a significant amount of fear and uncertainty. Stocks have experienced heavy selling pressure, and the bond market hasn’t escaped the volatility either. In addition, inflation expectations have increased amid disruptions in significant oil shipping routes. Inflation, real or perceived, erodes the value of fixed income investments such as mortgage-backed securities. This causes prices to fall and rates to rise as we have experienced since the start of the war.
The outcome hinges on several variables: the scale and duration of the war, whether it escalates into a broader war, and how central banks prioritize inflation versus growth during the continued conflict. Short-term volatility is likely to continue, with mortgage rates fluctuating as markets digest developments daily.
For now, homebuyers face a challenging environment of elevated rates, with experts advising caution and flexibility in financial planning as the situation evolves. A cautious approach to float/lock decisions is prudent.
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