Market Insight
The past week in the mortgage market saw relatively stable bond prices, resulting in flat rates overall. Economic data releases caused notable fluctuations, with mid-week improvements driven by weaker-than-expected ADP employment figures and modest inflation readings. Specifically, the ADP report showed a lower-than-anticipated job addition of 107K compared to the forecasted 145K, while the employment cost index rose by 0.9% instead of the projected 1%. However, these gains were offset by a robust employment report towards the end of the week. The unemployment rate dropped to 3.7% from 3.8%, and non-farm payrolls surged by 353K, surpassing the expected increase of 180K. Additionally, weekly jobless claims slightly exceeded estimates at 224K versus 212K, and the ISM Index showed improvement at 49.1 compared to 47. The Federal Reserve maintained interest rates unchanged. Mortgage rates concluded the week with discount points remaining relatively steady.
What to Expect Next
- 3-Year Treasury Note Auction: Tuesday, Feb. 6, 1:15 PM, EST
- The auction of 3-year Treasury notes is scheduled for Tuesday, potentially influencing mortgage rates if demand is strong.
- Trade Data: Wednesday Feb. 7, 8:30 AM, EST
- Expected Trade Deficit: $62.2B
- The upcoming release of trade data on Wednesday may impact the dollar’s value, potentially affecting mortgage rates, especially if the deficit deviates from the consensus estimate.
- 10-Year Treasury Note Auction: Wednesday, Feb. 7, 1:15 PM, EST
- Auction of 10-year Treasury notes on Wednesday could also influence mortgage rates based on market demand.
- Weekly Jobless Claims: Thursday, Feb. 8, 8:30 AM, EST [Subtitle]
- Estimated Claims: 215K
- Thursday’s weekly jobless claims report will provide insights into employment trends, potentially impacting mortgage rates if the number differs significantly from the consensus estimate.
- 30-Year Treasury Bond Auction: Thursday, Feb. 8, 1:15 PM, EST
- The auction of 30-year Treasury bonds on Thursday may contribute to rate movements depending on investor demand.
Understanding Trade Dynamics
Historically, the US economy operated somewhat independently of global economic activities. However, increased international trade and reliance on foreign investment in US debt have heightened awareness of trade-related factors. The relationship between the dollar’s exchange rate and foreign trade flows is significant. Purchasing US exports necessitates buying dollars, while importing goods involves selling dollars. Similarly, foreign investments in US debt require acquiring US dollars, making them susceptible to exchange rate fluctuations.
