Market Comment

Mortgage bond prices finished the week near unchanged which held rates flat despite significant volatility throughout. Rates improved to start the week but quickly reversed course in response to stronger than expected data and continued oil price fluctuations. There are strong concerns that China’s demand will decrease as their production is impacted by continued Covid infections. China’sconsumption of energy is one of the highest in the world. Global economic expectations are also throttled amid continued uncertainty which resulted in some flight to safety buying of US debt instruments. Construction spending rose 0.2% vs an expected 0.4% decline. ADP employment rose 245K vs 148K. Weekly jobless claims were 204K vs 225K. Mortgage interest rates finished the week unchanged to better by approximately 1/8 of a discount point.

Looking Ahead
Economic IndicatorRelease Date & TimeConsensus EstimateAnalysis
Consumer CreditMonday, Jan. 9,
3:00 pm, et
$22.5BLow importance. A significantly large increase may lead to lower mortgage interest rates.
3-year Treasury Note AuctionTuesday, Jan. 10,
1:15 pm, et
NoneImportant. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
10-year Treasury Note AuctionWednesday, Jan. 11,
1:15 pm, et
NoneImportant. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Consumer Price IndexThursday, Jan. 12,
8:30 am, et
Up 0.1%,
Core up 0.3%
Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates.
Weekly Jobless ClaimsThursday, Jan. 12,
8:30 am, et
211KImportant. An indication of employment. Higher claims may result in lower rates.
30-year Treasury Bond AuctionThursday, Jan. 12,
1:15 pm, et
NoneImportant. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
U of Michigan Consumer SentimentFriday, Jan. 13,
10:00 am, et
60.1Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Fed Minutes

The minutes from the December Fed meeting released last week reinforced the Fed’s position on additional rate hikes.

The Fed reported, “Consumer price inflation—as measured by the 12-month percent change in the price index for personal consumption expenditures (PCE)—stepped down in October but continued to be elevated.”

However, “With inflation still well above the Committee’s longer-run goal of 2 percent, participants agreed that inflation was unacceptably high. Participants concurred that the inflation data received for October and November showed welcome reductions in the monthly pace of price increases, but they stressed that it would take substantially more evidence of progress to be confident that inflation was on a sustained downward path.”

They continued, “With inflation still elevated, the staff continued to view the risks to the inflation projection as skewed to the upside. Moreover, the sluggish growth in real private domestic spending expected over the next year, a subdued global economic outlook, and persistently tight financial conditions were seen as tilting the risks to the downside around the baseline projection for real economic activity, and the staff still viewed the possibility of a recession sometime over the next year as a plausible alternative to the baseline.”