February 19th-23rd 2024
Monday – A Respite for Mortgage Rates
Markets were closed on Presidents Day, offering a pause for the financial markets and mortgage rates. Long weekends can offer an upside in the form of decreasing the potential for volatility. On the downside, rates have to wait for any inspiration to move lower.
Tuesday - A Quiet Equilibrium
Tuesday began with the release of the Leading Economic Indicators (LEI) report, reflecting a modest decline of 0.4%. As the name suggests, the LEI is a composite of key financial and economic metrics, encompassing aspects like stock prices, interest rate spreads, jobless claims, and building permits. Due to the fact that these individual data points are known by the market prior to the release of the cumulative report, it has little to no impact on rates. The 30-year fixed mortgage rate ended the day at 7.11%, a few points below last Friday's close.
Wednesday - Global Influences and Fed Minutes
Midweek, interest rates ticked upward, influenced not by domestic economic news but by Germany's GDP forecast revision down from 1.3% to 0.2%, citing the unstable global economic environment, diminishing growth of world trade, and the impact of higher interest rates.
Midday rates continued their upward trend as the Federal Reserve's January meeting minutes were released. Though they revealed no major surprises and expressed optimism in the US economy and progress on inflation, several Fed officials cautioned against cutting rates too early, noting the possibility of rekindling inflationary pressures. This sentiment, coupled with last week's unexpectedly hot CPI report, has recalibrated market expectations for when and how much interest rates will be cut in 2024. The day concluded with the 30-year fixed mortgage rate at 7.14%.
On a side note, the Mortgage Bankers Association (MBA) reported a 10.6% dip in mortgage application volume, with refinance activity also declining, underscoring the dampening effect of higher interest rates over the last few weeks. Application volume has now experienced consecutive weekly declines, putting hope for a strong spring housing market in jeopardy.
Thursday - Mixed Data with a Sideways Drift
Thursday saw a muted bond market response to the stronger-than-anticipated Jobless Claims data. Traders showed greater interest in the S&P PMI data, which suggested easing price pressures on wholesalers' inputs and a slowdown in the service sector, potentially countering recent CPI findings. However, significant economic indicators like the Personal Consumption Expenditures (PCE) are still a week away, leaving the bond market adrift.
January's existing home sales data indicated a robust market, but this backward-looking indicator had little immediate market impact, given the lag between contract signings and closings. Mortgage rates nudged to their highest point of the year at 7.16%.
Friday - An Unforeseen Rally Concludes the Week
With no data released on Friday, expectations were for an uneventful close to the week. However, it was a welcome surprise when the same factors that previously hurt markets on Wednesday helped them on Friday when European data and policy speeches helped bonds rally impressively. That, along with the quarterly futures * Treasury rollover, contributed to the interest rates recovering from their midweek losses, with the mortgage rates dipping to the lowest level in seven days at 7.08%, illustrating how a single day can counterbalance several stagnant ones.
*"Treasury rollover" refers to the process of reinvesting funds from a mature Treasury bill, note, or bond into a new issue of the same or a different Treasury security.
What's Ahead
The week ahead promises to bring more activity, with the PCE, the Fed's preferred inflation indicator, headlining on Thursday. Consumer confidence figures will arrive on Tuesday along with the Case Shiller home price index; Wednesday brings GDP revisions and speeches from several Federal Reserve presidents, potentially shedding light on future monetary policy. Thursday's agenda includes the much-anticipated PCE, jobless claims, and housing data, capped off by commentary from four Fed presidents. The week concludes with ISM manufacturing data, consumer sentiment, and construction spending numbers, which are expected to reflect moderate optimism as the manufacturing sector appears to have stabilized in recent months. This diverse array of economic indicators and policy insights suggests a potentially volatile but informative week for financial markets and mortgage rates, underscoring the importance of staying informed on these developments.
Next Weeks, Notable economic reports
Monday - New Home Sales
Tuesday - Case Shiller Home Price Index, consumer confidence
Wednesday - GDP revision,
Thursday - Initial Jobless Claims, PCE index, Pending Home Sales
Friday - ISM Manufacturing, Consumer sentiment.
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