Market Comment
Mortgage bond prices finished the week lower which put upward pressure on rates. Rates worsened Monday, bounced back mid-week, and closed on a negative note. Rising energy prices early in the week stoked some inflationary fears as Saudi Arabia announced production cuts. Other OPEC members voted against cuts. The oil price spikes were short-lived, and prices fell a little by the end of the week. The Fed remained a dominant force in the MBS market with holdings in excess of $2.5T. There were very few economic releases. Factory orders rose 0.4% vs 0.8%. The trade deficit was $74.6B vs 75.2B. Weekly jobless claims were 261K vs 235K. Mortgage interest rates finished the week worse by approximately 1/4 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| 3 and 10-year Treasury Note Auctions | Monday, June 12, 1:15 pm, et | None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Consumer Price Index | Tuesday, June 13, 8:30 am, et | Up 0.4%, Core up 0.3% | Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates. |
| Producer Price Index | Wednesday, June 14, 8:30 am, et | Up 0.3%, Core up 0.2% | Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates. |
| Fed Meeting Adjourns | Wednesday, June 14, 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. |
| Retail Sales | Thursday, June 15, 8:30 am, et | Up 0.5% | Important. A measure of consumer demand. Weakness may lead to lower mortgage rates. |
| Philadelphia Fed Survey | Thursday, June 15, 8:30am, et | -7.3 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Industrial Production | Thursday, June 15, 9:15 am, et | Up 0.4% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| U of Michigan Consumer Sentiment | Friday, June 16, 10:00 am, et | 59 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Fed Pause
The Federal Open Market Committee meets this week and is expected to keep rates unchanged. The financial markets currently price in no additional movements between now and the end of the year. The latest projections put split odds of a pivot and rate adjustments lower sometime in the spring of 2024.
While that is the current sentiment, we all know how quickly things can change. The Fed remains clear that they are data dependent. This simply means they will not adjust course until significant data shows that their prior rate adjustments are working to get inflation back to their long-term goal of 2%. Inflation has backed of the upward march in response to the Fed rate hikes but there remains concern and uncertainty about continued elevated inflation levels. Some analysts and economists even contemplate the Fed adjusting their target inflation rate to 3% over time.
Mortgage interest rates are likely to remain elevated until inflation fears subside. A cautious approach to float/lock decisions is prudent in this uncertain environment.