Fourth quarter GDP higher than expected

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Published Date 1/25/2024

Today's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

Rates Currently Trending: Neutral

Mortgage rates are getting support today. The MBS market worsened by -24 bps yesterday. This may have been enough to increase mortgage rates or fees. The market experienced moderate volatility yesterday.

Today's Rate Forecast: Neutral

Housing: We will get New Home Sales for December at 10 am ET.

Jobs: Initial Weekly Jobless Claims rose from 189K to 214K versus estimates of 200K. The more closely watched 4 week moving average dropped to 202K. Continuing Claims moved higher from 1.806M to 1.833M.

Manufacturing: Headline December Durable Goods Orders were flat at 0.0% versus estimates of 1.1%. However, Ex Transportation (think Boeing) it was up 0.6% versus estimates of 0.2%. Non Defense Capital Goods Ex Aircraft (business spending) jumped by 0.3% versus estimates of only 0.1%.

GDP: The nation's economic report card, GDP was much higher than expected in the 4th QTR - jumping by 3.3% versus estimates of 2.0%. This is a real head-scratcher as this follows a red-hot 3rd QTR reading of 4.9%. Interestingly, the prices paid component increased by only 1.5% on a QoQ basis which is an exceptionally low number with a GDP reading that high. A main driver in the high GDP data was State and local government spending - up 3.7%, as did a 2.5% increase in federal government expenditures. Also released this morning was the Chicago Federal Reserve's National Economic Activity Index for December and it runs very counter to the GDP data. As there were expectations of a small rise from 0.03 to 0.06, but this index (which draws on 85 economic indicators) tumbled to -0.15 in December. 2023 ends with 8 of the 12 months in negative territory.

Treasury Auction: We have a 7 year note auction today at 1 pm.

Central Banks: The European Central Bank kept their key interest rate at 4.50% which was widely expected.

Today's Potential Rate Volatility: Neutral

This morning markets are getting some support. Volatility has started at moderate to high levels.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

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