Sunday, August 25, 2019

Market Commentary

Updated on August 23, 2019 10:34:35 AM EDT

Today’s only relevant economic release was Julys New Home Sales that showed sales of newly constructed homes fell 12.8% last month. This was a much weaker than expected but a significant upward revision to June’s sales is skewing July’s monthly change. The number of sales did come in lower than forecasts, making the report good news for bonds and mortgage rates. However, because of the revision and the fact this is not a highly important release, mortgage rates had little reaction to the news.

What is mostly driving bond trading this morning is Chairman Powell’s speech at the Jackson Hole Fed Conference. He stated that the economy has some challenges to deal with. Specifically, he noted slower economic activity in China and Germany, the potential hard Brexit where Britain leaves the European Union on October 31 without a deal made, volatile stocks and geopolitical issues. Those hurdles all could contribute to a weaker global economy that will undoubtedly affect ours to some degree, at the very least. Since bonds become more appealing to investors during weaker economic conditions, we are seeing bonds and mortgage rates react favorably to this news.

Next week has a handful of economic reports for the bond market to watch in addition to a couple of potentially influential Treasury auctions. The week starts with the pretty important Durable Goods Orders report that gives us a measurement of manufacturing sector strength. There are also some other relevant reports that can cause changes to mortgage rates scheduled throughout the week. Look for details on all of next week’s activities in Sunday evening’s weekly preview.

 ©Mortgage Commentary 2019