09/08/2023
Mortgage Market
Last week, it was happy days in the mortgage market, with average 30-yr rates plunging from 7.5% to nearly 7.0%. As a recap, that was because the jobs data (JOLTs, ADP and BLS) suggested a slowdown in the pace of hiring AND several Fed members made ‘I think we’ve done enough already’ comments.
This week, rates reversed course, rising back to 7.33% yesterday. Factors that influenced that included: 1) a strong ISM services number relative to consensus, and 2) huge corporate bond issuance. This DESPITE more Fed members making surprisingly dovish statements (like Loretta Mester below).
The next Fed meeting is on September 20. Despite the pull-back in bond prices, the market is still putting a 93% probability on NO HIKE.
“We will certainly not continue to raise rates until inflation has already fallen to 2%. Nor will we wait to lower interest rates until inflation is at 2%.” — Loretta Mester, Cleveland Fed President
[Here’s what that comment means: ‘if we’re confident that inflation is coming down as a result of the cumulative impact of +525 bps in rate hikes, we don’t have to wait until we hit the target to stop hiking or even cut rates.’ This is actually a pretty dovish statement.]
{*Data from my friendly neighborhood Mortgage lender}
