What Happened Last Week?
Rates End Week Little Changed at Multi-Week Lows
Bond markets were closed for Thanksgiving on Thursday. That meant mortgage lenders wouldn’t be publishing new rates. While markets were technically open for a half day on Friday, it’s just as well to consider it part of a 4-day weekend. Many mortgage lenders simply offer the same rates seen on Wednesday because market conditions are so unreliable.
Wednesday’s full trading day brought modest gains for bonds–something that would normally imply a modest drop in mortgage rates. But the average lender was playing things safe last week, which is fairly typical. In this context “safe” means offering rates that are slightly higher than they otherwise would be during more normal times for financial markets. Nonetheless, mortgage rates have been hovering around the best levels since late September for two straight weeks now. The average conventional 30-year fixed rate is in the mid 6’s.
Source: Matthew Graham, Mortgage News Daily 11/23/22)
What’s on the Agenda for this Week?
Overview
Hope you had a great Thanksgiving and long weekend! Benchmark mortgage backed securities (MBS) has been in the same very well defined trading channel for 11 straight sessions now.
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Inflation Nation, (2) Jobs, Jobs, Jobs and (3) The Talking Fed.
(1) Inflation Nation: The Fed’s preferred key measure of inflation (Core PCE) will be on Thursday. Expectations are that it will continue to a “5 handle” in the 5.0 to 5.1% range. The headline PCE is expected to remain at 6.2%.
(2) Jobs, Jobs, Jobs: There is a ton of job and wage related data all throughout the week with JOLTS, ADP, Initial Claims and Challenger Job Cuts. Then will be Big Jobs Friday with Non-Farm Payrolls, Unemployment Rate, Average Hourly Earnings, U6 Underemployment and the Labor Force Participation Rate.
(3) The Talking Fed: This is a pivotal week from the Fed. Last week, it was clear that market sentiment shifted to expect the Fed to move to a slower pace of rate hikes and at a smaller scale per meeting after digesting several statements from key Fed members. The Beige Book will be released this week, which is exactly two weeks from the next FOMC meeting/decision. Also, Fed Chair Powell and many others will speak prior to the media blackout period that starts on Monday leading up to their meeting.
Market Wrap-up
Domestic Flavor
Rosie the Riveter: The November Dallas Fed District Manufacturing Survey was awful but it was less-worse than expected, coming in at -14.4 vs. estimates of -20.5.
The Talking Fed: NY Fed President (voting member) John Williams said, “Inflation is far too high, and persistently high inflation undermines the ability of our economy to perform at its full potential” and that “Further tightening of monetary policy should help restore balance between demand and supply and bring inflation back to 2% over the next few years.”
On Deck for Tomorrow: Consumer Confidence, Case Shiller Home Price Index, FHFA Housing Price Index