MIG Market Watch, July 26th, 2021
Market Comment
Mortgage bond prices finished the week flat which held rates steady. We started the week with some significant improvements Monday morning but selling pressure ensued mid-week. A slight bounce back Friday helped even things. The data continued to be mixed. NAHB housing came in as expected. Housing starts were 1643K vs 1580K. Jobless claims were 419K vs 355K. Existing home sales were 5.86M vs 5.9M. LEI rose 0.7% vs 1%. Stock volatility factored into trading as the DOW saw large up and down swings throughout the week. Mortgage interest rates finished the week near unchanged to better by 1/8 of a discount point thanks to the continued daily Fed MBS purchases.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| New Home Sales | Monday, July 26, 10:00 am, et | 800K | Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
| Durable Goods Orders | Tuesday, July 27, 8:30 am, et | Up 2.1% | Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
| Consumer Confidence | Tuesday, July 27, 10:00 am, et | 125.8 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| Fed Meeting Adjourns | Wednesday, July 28, 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. |
| Q2 GDP | Thursday, July 29, 8:30 am, et | Up 8.0% | Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| Personal Income and Outlays | Friday, July 30, 8:30 am, et | Down 1.3%, Up 0.1% | Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| PCE Core Inflation | Friday, July 30, 8:30 am, et | Up 0.6% | Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve. |
| Q2 Employment Cost Index | Friday, July 30, 8:30 am, et | Up 1.1% | Very important. A measure of wage inflation. Weakness may lead to lower rates. |
| U of Michigan Consumer Sentiment | Friday, July 30, 10:00 am, et | 80.5 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Interesting Times
There is a Chinese proverb that states, “May you live in interesting times.” It is often argued that the word interesting is meant to be a synonym for turbulent or dangerous. This phrase hits the bull’s-eye given the current state of the financial markets and continued viral outbreaks. Many traders are concerned the Fed will adjust their rate increase projection to sooner rather than later and it is an understatement to say that shutdowns and openings are polarizing. Many Fed officials voiced support for future rate hikes at the last meeting. The Fed has difficult decisions to make. They may need to raise rates. However, the last thing they want to do is stifle the economic recovery they have worked so hard to produce. Timing is the key. Now is a great time to take advantage of low rates to avoid any future rate spikes.
