Durable Goods Report Helps MBS

By
Mortgage and Lending with JB Mortgage Capital, Inc. NMLS# 247447

This morning's Durable Goods report (for November) was below expectations and sparked a rally in the Mortgage Backed Securities (MBS) market.

  • Expectations were for a 1.5% increase
  • The report showed a decline of -0.2%

The biggest reason for the decline in Durable Goods can be attributed to Boeing. Defense and Aircraft orders (or lack there of) were a big reason for the decline; most other areas showed decent gains.

What does this mean for mortgage rates?

It will help keep a lid on the recent trend in which mortgage rates were inching higher as we head into the holiday season. Overall though, mortgage rates remain near their 2019 lows and both homebuyers and homeowners (who are looking to refinance a current mortgage) should feel good about the level in which mortgage rates are finshing the year.

A slow week for economic reports:

Not surprisingly this is going to be a slow week for economic reports. After today's Durable Goods report we have the weekly unemployment report and the weekly MBA mortgage applications report. Most lenders take a conservative approach with pricing during the holidays as the market is subjet to abnormal fluctuations along with the minimal staff some lenders have on hand to help with the processing of loans.

Next week:

Next week things pick up just a bit with the Chicago PMI report, the Consumer Confidence report and the ISM Manufacturing PMI report.

These three reports can impact the Mortgage Backed Securitis market and thus move consumer mortgage rates. However the likelyhood of that happening (even if the reports are significantly above or below expectations) is minimal. Bond traders, like everyone else, like to take some vacation time during the holidays so bond market volume is usually lower than normal.

The week of January 6th we should start to see some meaningful trading in the Mortgage Backed Securities market and once that happen we'll have a better idea of where mortgage rates will be early January 2020.

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Kevin O'Connor

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