Monday, June 12, 2017

What's going on and why does it matter? This is a big week for the financial markets with a packed economic calendar and a Fed meeting scheduled for Tuesday and Wednesday. The market is anticipating that the Fed will hike short-term interest rates on Wednesday by 0.25%. More importantly, though, the market will be watching the Fed's statement very closely to get a glimpse into their future plans. Keep in mind that mortgage rates aren't directly impacted when the Fed changes short-term interest rates. In fact, mortgage pricing may actually improve if the bond market thinks that the Fed will be less aggressive with future rate hikes and/or extend their massive bond buying program. Over the past 9 years, the Fed has been the largest buyer of mortgage bonds in the market, and that has been a large contributing factor to low mortgage rates.  For example, average supply of new mortgage bonds has been just over $2 billion per day, while Fed purchases have averaged roughly $1 billion per day. In fact, the Fed is scheduled to purchase up to $1.625 billion of 30-year conventional mortgage bonds today. In other news, a large supply of US Treasuries is scheduled to hit the bond market this week, so that may dampen the market's appetite for mortgage bonds. What should you do about it? Watch for mortgage bonds to bounce around between their 30-day and 200-day moving averages, but be prepared to lock your rate quickly if bonds break below their 30-day moving average. ..... ..... Economic reports that may impact mortgage rates this week: Date Report Period Prior Estimate Actual Tue 13 Jun PPI final demand May 0.5% 0.0% Wed 14 Jun Core CPI May 0.1% 0.2% Wed 14 Jun Real Weekly Earnings May 0.4% 0.0% Wed 14 Jun Retail Sales May 0.4% 0.1% Wed 14 Jun Business Inventories Apr 0.2% -0.2% Wed 14 Jun Fed Funds Target Rate Jun 1.0% 1.25% Thu 15 Jun NY Fed Mfg. Index Jun -1.0 3.75 Thu 15 Jun Initial Jobless Claims Week of June 5 245,000 242,000 Fri 16 Jun Industrial Production May 1.0% 0.2% Fri 16 Jun Capacity Utilization May 76.7% 76.8% Fri 16 Jun Manuf. Output May 1.0% 0.2% Fri 16 Jun Building Permits May 1.23M 1.25M Fri 16 Jun Housing Starts May 1.17M 1.22M Fri 16 Jun U of Mich. Consumer Sentiment Jun 97.7 97.0