Market Comment
Mortgage bond prices finished the week sharply lower which put significant upward pressure on rates. We started the week on a positive note with weaker stocks Monday morning. The data was mixed throughout the week. NAHB housing was 76.0 vs 74.0. Weekly jobless claims were 351K vs 315K. LEI rose 0.9% vs 0.6%. New home sales were 740K vs 725K. The Fed left rates unchanged, but their statement and comments by the Fed Chair caused some major MBS selling pressure the remainder of the week. The Fed indicated, “If progress continues broadly as expected the Committee judges that a moderation in the pace of asset purchases may soon be warranted.” Powell then mentioned a possible rate hike next year and that the FOMC aims to complete tapering by mid-2022. 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 |
| Durable Goods Orders | Monday, Sept. 27, 8:30 am, et | Up 0.5% | Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
| FHFA House Price Index | Tuesday, Sept. 28, 10:00 am, et | Up 1.6% | Moderately Important. A measure of single-family house prices. Weakness may lead to lower rates. |
| Consumer Confidence | Tuesday, Sept. 28, 10:00 am, et | 114.1 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| Q2 GDP | Thursday, Sept. 30, 8:30 am, et | Up 6.6% | Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| Weekly Jobless Claims | Thursday, Sept. 30, 8:30 am, et | 355K | Important. An indication of employment. Higher claims may result in lower rates. |
| Personal Income and Outlays | Friday, Oct. 1, 8:30 am, et | Up 0.3%, Up 0.6% | Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| PCE Core Inflation | Friday, Oct. 1, 8:30 am, et | Up 0.2% | Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve. |
| ISM Index | Friday, Oct. 1, 10:00 am, et | 59.4 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates |
| U of Michigan Consumer Sentiment | Friday, Oct. 1, 10:00 am, et | 71.1 | 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 inflation is in check. However, 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.