![Mortgage Investors Group in [Dynamic1]](../assets/images/mortgage-investors-group.svg)
Market Comment
Mortgage bond prices finished the week sharply lower which put upward pressure on rates. Strong economic data set the tone for heavy selling pressure as traders adjusted their Fed pivot sentiments. Industrial production rose 0.1% vs 0%. Capacity use was 78.6% vs 78.7%. NAHB housing was 44 vs 39. Retail sales rose 0.6% vs 0.4%. Housing starts were 1.46M vs 1.426M. Weekly jobless claims were 187K vs 207K. Existing home sales were 3.78M vs 3.82M. Consumer sentiment was 78.8 vs 78. Mortgage interest rates finished the week worse by approximately 3/4 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Leading Economic Indicators | Monday, Jan. 22, 10:00 am, et |
Down 0.3% | Important. An indication of future economic activity. Weakness may lead to lower rates. |
| 2-year Treasury Note Auction | Tuesday, Jan. 23, 1:15 pm, et |
None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| 5-year Treasury Note Auction | Wednesday, Jan. 24, 1:15 pm, et |
None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Durable Goods Orders | Thursday, Jan. 25, 8:30 am, et |
Up 1.1% | Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
| Weekly Jobless Claims | Thursday, Jan. 25, 8:30 am, et |
200K | Important. An indication of employment. Higher claims may result in lower rates. |
| Q4 GDP | Thursday, Jan. 25, 8:30 am, et |
Up 3.1% | Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| New Home Sales | Thursday, Jan. 25, 10:00 am, et |
640K | Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
| Personal Income and Outlays | Friday, Jan. 26, 8:30 am, et |
Up 0.3%, Up 0.4% |
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| PCE Core Inflation | Friday, Jan. 26, 8:30 am, et |
Up 0.2% | Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve. |
Term Premia
In standard economic theory yields are composed of two factors: expectations for the future path of rates and term premium. The Fed indicates, “The term premium is defined as the compensation that investors require for bearing the risk that interest rates may change over the life of the bond. Since the term premium is not directly observable, it must be estimated, most often from financial and macroeconomic variables.” The Fed issues US Treasury term premia estimates from several models. These models tend to trend in the same direction, just like MBSs and Treasuries, but often show large gaps and discrepancies.
This is important to remember when contemplating where mortgage interest rates will be in the future. The results from the most sophisticated models and the most powerful institutions are constantly revised. With that in mind, a cautious approach to float/lock decisions is prudent.
