Thursday, August 22, 2019

Market Commentary

Updated on August 22, 2019 10:39:10 AM EDT

Yesterday’s afternoon release of last month’s FOMC minutes didn’t give us many surprises. There was discussion of a half point rate cut instead of the quarter point they made, but the vote came to the quarter point. We saw some movement in bonds after they were released at 2:00 PM ET, but it doesn’t appear that they caused much movement in mortgage rates.

Weekly unemployment figures came in lower than expected this morning. Today’s update revealed 209,000 new claims for benefits were filed last week, down from the previous week’s revised 221,000 initial filings. Declining claims is a sign of strength in the employment sector. Accordingly, we can consider the data negative for mortgage rates but because this is just a weekly snapshot it has had little impact on this morning’s pricing.

Also posted this morning was July’s Leading Economic Indicators. The Conference Board announced a 0.5% increase, meaning the indicators are predicting economic growth over the next several months. That was stronger than expectations. Since bonds tend to thrive in weaker economic conditions, this morning’s release was not favorable for mortgage rates. However, as with the weekly unemployment update, this report doesn’t carry a high level of importance in the markets. That has prevented it from heavily influencing mortgage rates.

Julys New Home Sales data is set for release tomorrow morning at 10:00 AM ET. This report will give us another indication of housing sector strength and mortgage credit demand but tracks only a small portion of all home sales. The majority of U.S. home sales were covered in yesterday’s Existing Home Sales report. This data usually doesnt have much of an impact on bond prices or mortgage rates. Current forecasts are calling for little change in sales of newly constructed homes between June and July. A large increase in sales would indicate housing sector strength, making the data negative for mortgage rates.

Also worth noting is the annual central banker conference in Jackson Hole, Wyoming. There have been major events to come out of this event in the past while others have been non-factors. Federal Reserve Chair Jerome Powell is scheduled to speak at 10:00 AM tomorrow, which will be watched very closely. This could be a market-moving event if he gives us any surprises. Of particular interest is anything related to the global economy, inflation and the likelihood of needed future Fed rate cuts or hikes.

 ©Mortgage Commentary 2019