MIG Market Watch, November 2nd, 2020
MARKET COMMENT Mortgage bond prices finished the week higher. The Fed effectively recovered the losses from the prior week with their continued MBS purchases. Rates improved slowly Monday through Wednesday morning with some slight weakness the latter portion of the week. The data was generally very solid. Durable goods orders rose 1.9% vs the expected 0.5% increase. The FHFA house price index rose 1.5% vs 0.8%. Consumer confidence was 100.9 vs 101.9. Weekly jobless claims were 751K vs the expected 763K. Income rose 0.9 vs the expected 0.3 increase. Spending rose at 1.4 vs 1.0. Core PCE rose 0.2% as expected. ECI rose 0.5 vs 0.7. Consumer sentiment was 81.8 vs 81.2. Mortgage interest rates finished the week better by approximately 1/8 to 1/4 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| ISM Index | Monday, Nov. 2, 10:00 am, et | 55.6 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Construction Spending | Monday, Nov. 2, 10:00 am, et | Up 0.9% | Low importance. An indication of economic strength. Significant weakness may lead to lower rates. |
| Factory Orders | Tuesday, Nov. 3, 10:00 am, et | Up 1.1% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| ADP Employment | Wednesday, Nov. 4, 8:30 am, et | 525K | Important. An indication of employment. Weakness may bring lower rates. |
| Weekly Jobless Claims | Thursday, Nov. 5, 8:30 am, et | 750K | Important. An indication of employment. Higher claims may result in lower rates. |
| Preliminary Q3 Productivity | Thursday, Nov. 5, 8:30 am, et | Up 5.1% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| Fed Meeting Adjourns | Thursday, Nov. 5, 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. |
| Employment | Friday, Nov. 6, 8:30 am, et | 7.7%, Payrolls +700K | Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
| Consumer Credit | Friday, Nov. 6, 3:00 pm, et | $6.56B | Low importance. A significantly large increase may lead to lower mortgage interest rates. |
Solid GDP The Q3 gross domestic product report showed a stronger than expected increase last week. GDP rose 33.1% versus the expected 30.2% increase. This was important because it is one of the biggest releases heading into the Fed meeting this week. While no rate adjustments are expected the rebound from the prior negative 31.4% reading in the second quarter will likely be noted.Mortgage rates have been a little more volatile the past few weeks with the pending election and increased coronavirus cases around the world. The Fed continues their daily MBS purchases which generally keeps the movements within a narrow range. However, their activity does not stop all the up and down movements, so caution remains key with rates still at historically favorable levels.
