Market Update 06/28/2010
Market Comment
Mortgage bond prices rose last week applying downward pressure on mortgage rates. Volatility in both the stock and bond markets remained high with broad swings occurring on a daily basis. Mortgage rates moved lower following the release of weak housing data. The improvements seen earlier in the week were reversed following a weak 5-year Treasury auction on Wednesday. The volatility seen this week is expected to continue until the future of the economy becomes clear.
Rates fell by about 3/8 of a discount point for the week.
Personal income and outlays will set the tone for trading this week. The employment report to be released on Friday will be the most important release this week. The focus lately has been on the payrolls component rather than the headline figure. If payrolls come in stronger than expected, mortgage interest rates may worsen.
LOOKING AHEAD
|
Economic |
Release |
Consensus |
|
| Personal Income and Outlays |
Monday, June 28, |
Income up 0.5% Outlays up 0.1% |
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| Consumer Confidence |
Tuesday, June 29, |
62. | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| ADP Employment |
Wednesday, June 30, |
+56K | Important. An indication of the employment. Weakness in payrolls may bring lower rates. |
| ISM Index |
Thursday, July 1, |
58.8 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Employment |
Friday, July 2, |
Jobs -70K Unemp @ 9.7% |
Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
| Factory Orders |
Friday, July 2, |
-0.6% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
Employment
The employment report provides an abundance of information for almost every sector of the economy. Not only does the employment report give basic employment payroll statistics for the major working sectors, it also provides the average hourly earnings and the average workweek. Using this information provided by the Bureau of Labor Statistics (BLS) of the U.S. Department of Labor, economists estimate many other economic indicators such as industrial production, personal income, housing starts, and GDP monthly revisions. Since there is little data for economists to base their estimates on, the margin of error for the estimates tends to be high. As a result, the employment report can cause substantial market movements.
The BLS compiles data from two unrelated surveys that they conduct, the household survey and the establishment survey, in order to complete the employment report. This explains why sometimes there is an unexpected divergence between the unemployment rate and payrolls figures each month.
This week’s employment data will provide valuable insight into factors the Federal Open Market Committee will use to make future rate decisions. An employment rebound may prompt the Fed to raise short-term interest rates. However, if employment remains weak, then the Fed may seriously consider keeping rates low. Floating into this report is very risky without considerable gains Thursday afternoon heading into it.
Market Update 06/21/2010
Market Comment
Mortgage bond prices rose last week pushing mortgage interest rates lower. Uncertainty in the Euro zone resulted in some flight to quality buying of US debt instruments. There were concerns that Spain could be the next economy to falter following the Greek instability. Most of the data showed a US economy that continues to struggle with little current price pressures. Weekly jobless claims were higher than expected and the consumer price data came in exactly as expected. Rates fell by about 1/2 of a discount point for the week.
The Fed meeting Wednesday will be the most important event this week. With the world economies in turmoil the Fed is expected to keep the course with the current low interest rate policy. Some Fed officials indicate that rate increases may eventually be necessary. Few expect the hikes to come this week. If there are surprises we could see huge swings in the financial markets.
LOOKING AHEAD
|
Economic |
Release |
Consensus |
|
| Existing Home Sales |
Tuesday, June 22, |
Up 4.3% |
Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates. |
| New Home Sales |
Wednesday, June 23, |
Down 4.8% |
Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
| Fed Meeting Adjourns |
Wednesday, June 23, |
No change |
Important. No rate changes are expected but some volatility may surround the adjournment of this meeting. |
| Durable Goods Orders |
Thursday, June 24, |
Down 1.4% |
Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
| Weekly Jobless Claims |
Thursday, June 24, |
460k |
Important. An indication of US employment situation. A higher figure should help rates. |
| Preliminary Q1 GDP |
Friday, June 25, |
3.0 | Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| U of Michigan Consumer Sentiment |
Friday, June 25, |
75.2 |
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Fed MeetingThe United States central bank, the Federal Reserve, coordinates the borrowing and lending activities of federally chartered banks. The principal reason the Federal Reserve was created was to reduce severe financial crises. One way of accomplishing this goal is to control the amount of money that flows through the economy. By manipulating the US money supply, the Fed influences inflation, unemployment, and the level of US economic activity. The Fed has a variety of tools that it uses to control the money supply, but its chief policy tool is the manipulation of short-term interest rates.
The Federal Reserve can adjust two distinct short-term interest rates. The discount rate is the interest rate which banks pay the Fed for primarily overnight loans. Despite its name, the Fed funds rate is the rate banks pay to borrow from other banks. The Federal Reserve has direct control over the level of short-term interest rates, the Fed’s influence over longer-term interest rates is less certain. All eyes will be focused on the Fed meeting Wednesday. Most analysts predict no rate change following the tame inflation data.
Keep in mind that Fed rate changed do not automatically mean mortgage interest rates will change. The Federal Reserve has direct control over the level of short-term interest rates. The Fed’s influence over longer-term interest rates is less certain. A cautious approach to float/lock decisions is prudent heading into the Fed meeting this week. Market volatility is likely.
Market Update 06/14/2010
Market Comment
Mortgage bond prices fell last week pushing mortgage interest rates higher. Trading was positive for the week through Wednesday’s close. The data generally was benign causing no large mortgage bond market swings. Unfortunately a strong 273-point jump in the DOW Thursday resulted in mortgage rates worsening by about 3/8 of a discount point that afternoon. Fortunately bond prices recovered some Friday, as the stocks were unable to hold those gains. Rates rose by about 1/8 of a discount point for the week.
The producer and consumer price index data will be the most important releases this week. If inflation remains tame mortgage interest rates may improve. Expect global economies to continue to factor into trading.
LOOKING AHEAD
|
Economic |
Release |
Consensus |
|
| Housing Starts |
Wednesday, June 16, |
Down 2.5% | Important. A measure of housing sector strength. Larger than expected decreases may lead to lower rates. |
| Producer Price Index |
Wednesday, June 16, |
Down 0.4%, |
Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates. |
| Industrial Production |
Wednesday, June 16, |
Up 0.7% | Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates. |
| Capacity Utilization |
Wednesday, June 16, |
74.2% | Important. A figure above 85% is viewed as inflationary. A decrease may lead to lower rates. |
| Weekly Jobless Claims |
Thursday, June 17, |
450K | Important. An indication of US employment situation. A higher figure should help rates. |
| Consumer Price Index |
Thursday, June 17, |
Down 0.1% |
Important. A measure of inflation at the consumer level. Lower figures may lead to lower rates. |
| Leading Economic Indicators |
Thursday, June 17, |
Up 0.4% | Important. An indication of future economic activity. A smaller increase may lead to lower rates. |
| Philadelphia Fed Survey |
Thursday, June 17, |
17.0 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
Industrial Production
The Federal Reserve releases the Industrial Production report each month. It is a real measure of output from manufacturing, mining, electric, and gas utilities. The data is significant in that it provides an indicator of the state of the economy. Analysts use the data to attempt to determine market direction. The Fed uses the data to help set the course for monetary policy. Generally the Fed likes to see steady growth in the economy with little price pressures.
Mortgage interest rates generally react favorably to weaker than expected industrial production data. In times of economic weakness investors often move out of stocks and into mortgage bonds. When things look good investors often move out of bonds and back into stocks. We have seen these patterns frequently in recent months.
Floating into significant economic data always has some risk involved but the last release came in as expected and didn’t move the market much. Nonetheless, now is a great time to take advantage of mortgage interest rates at these historically low levels to avoid future market volatility.
Market Update 06/07/2010
Market Comment
Mortgage bond prices rose last week pushing mortgage interest rates lower. We were negative through Thursday as stocks performed generally well until Friday’s data was released. Fortunately bond prices surged higher Friday morning following the weaker than expected payrolls component of the employment report. In addition, news of a troubled Hungarian economy reignited global fears and resulted in flight to quality buying of US debt instruments. Stocks fell precipitously Friday. Rates fell by about 1/2 of a discount point for the week.
The retail sales data will be the most important release this week. The US Treasury auctions will also factor into trading along with the global economic uncertainty. The Euro remains especially volatile. If additional countries announce economic trouble the flight to quality buying of US debt instruments could continue.
LOOKING AHEAD
|
Economic |
Release |
Consensus |
|
| Consumer Credit |
Monday, June 7, |
Down $4.3 billion |
Low importance. A significantly larger than expected increase may lead to lower mortgage interest rates. |
| 3-year Treasury Note Auction |
Tuesday, June 8, |
None |
Important. $36 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| 10-year Treasury Note Auction |
Wednesday, June 9, |
None |
Important. $21 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Fed “Beige Book” |
Wednesday, June 9, |
None |
Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates. |
| Trade Data |
Thursday, June 10, |
$42 billion deficit |
Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| 30-year Treasury Bond Auction |
Thursday, June 10, |
None | Important. $13 billion of bonds will be auctioned. Strong demand may lead to lower mortgage rates. |
| Retail Sales |
Friday, June 11, |
Up 0.5% |
Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates. |
| U of Michigan Consumer Sentiment |
Friday, June 11, |
74.5 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| Business Inventories |
Friday, June 11, |
Up 0.4% | Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates. |
Warning of Higher RatesLast week Atlanta Fed’s Lockhart said that the Fed might need to raise rates to counter inflation even with high unemployment. “Good policy, even in circumstances of unacceptable levels of unemployment, may incorporate higher interest rates. The time is approaching when it will be appropriate to consider recalibrating interest rate policy.” He added, “as the economy continues to improve and financial markets find firmer ground, extraordinarily low policy rates will not be needed to promote recovery and will become inconsistent with maintaining price stability.”
Lockhart noted inflation remained under control for now. Now is a great time to take advantage of mortgage interest rates at these historically low levels to avoid future market volatility, especially with the recent decline in rates and remarks like Lockhart’s hitting the market.
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Market Update 05/31/2010
Market Comment
Mortgage bond prices fell last week pushing mortgage interest rates higher. The global economic turmoil continued with concerns about instability on the Korean peninsula. The Spanish government took over a regional bank, which added to the fray of an already battered Euro. The Chinese indicated they would not liquidate Euro bond holdings, which was a concern. Stocks continued to bounce up and down, as one hundred point swings were often the norm. Rates rose by about 1/2 of a discount point for the week.
The employment report Friday will be the most important event this week. The bond market will be closed Monday for Memorial Day. Mortgage interest rates may be volatile Tuesday as trading resumes following the extended holiday weekend. Look for continued choppy trading amid global economic instability.
LOOKING AHEAD
|
Economic |
Release |
Consensus |
|
| Construction Spending |
Tuesday, June 1, |
Up 0.1% |
Low importance. An indication of economic strength. A significant decrease may lead to lower rates. |
| ISM Index |
Tuesday, June 1, |
58.9 |
Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| ADP Employment |
Wednesday, June 3, |
Up 50k |
Important. An indication of employment. Weakness in payrolls may bring lower rates. |
| Revised Q1 Productivity |
Wednesday, June 3, |
Up 3.6% |
Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| Weekly Jobless Claims |
Thursday, June 4, |
455k |
Moderately Important. A measure of unemployment. Higher claims may bring lower rates. |
| Factory Orders |
Thursday, June 4, |
Up 1.1% | Important. A measure of manufacturing sector strength. A larger decrease may lead to lower rates. |
| Employment |
Friday, June 5, |
Unemp. @ 9.8%, |
Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
ADP EmploymentThe ADP employment report is a measure of employment derived from data of roughly 500,000 US businesses. The survey focuses on the private sector of the economy. In contrast, the Bureau of Labor Statistics releases the regular employment report which includes both private and government employment statistics.
The ADP employment report has gained more prominence lately in that it is delivered prior to the Friday employment report. This gives analysts an improved forecast heading into the payrolls component of the employment report later in the week.
The Fed is usually focused on keeping inflation in check. Tightening employment conditions can result in wage inflation. The ADP report provides solid data on these conditions. Despite this, the data still can diverge from the regular employment report. The employment report is derived from a household survey and an establishment survey. These surveys often differ from one another and from the ADP employment report in that they are based on different data sets. There are no guarantees that the most important employment report the first Friday of each month will mirror the ADP report released 2 days prior. With this in mind floating into the data is always very risky. Now is a great time to take advantage of mortgage interest rates at these historically low levels to avoid future market volatility.
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Market Update 05/24/2010
Market Comment
Mortgage bond prices rose last week applying downward pressure to mortgage interest rates. The Greek economic turmoil spread throughout the globe with equities falling precipitously. As a result we saw a tremendous amount of flight to quality buying of US debt instruments. The majority of the data came in bond-friendly with higher than expected weekly jobless claims helping rates improve. Rates fell by about 3/4 of a discount point for the week.
The Treasury auctions, gross domestic product data, and the PCE core inflation reading will be the most important events this week. Look for continued choppy trading amid global economic instability.
LOOKING AHEAD
|
Economic |
Release |
Consensus |
|
| Consumer Confidence |
Tuesday, May 25, |
58.5 |
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| 2-year Treasury Note Auction |
Tuesday, May 25, |
None |
Important. $42 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Durable Goods Orders |
Wednesday, May 26, |
Up 0.9% |
Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
| New Home Sales |
Wednesday, May 26, |
Up 2.2% |
Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
| 5-year Treasury Note Auction |
Wednesday, May 26, |
None |
Important. $40 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Q1 GDP |
Thursday, May 27, |
3.3% | Important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| 7-year Treasury Note Auction |
Thursday, May 27, |
None |
Important. $31 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Personal Income and Outlays |
Friday, May 28, |
Up 0.4%, |
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| PCE Core |
Friday, May 28, |
Up 0.1% | Important. An indication of inflation. Weakness may lead to lower rates. |
| U of Michigan Consumer Sentiment |
Friday, May 28, |
73.2 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
New Home SalesNew Home Sales data is compiled monthly by the Department of Commerce’s Census Bureau and is gathered from builders throughout the country. The data represents new home sales for the nation as well as four areas of the country: the Northeast, the Midwest, the South, and the West. Information on the average price of a home, the number of homes for sale, and the supply of unsold homes are also provided. The data is an important indicator because it shows any strength or weakness in the housing sector. A slowdown in new home sales tends to lead to a slowdown in housing starts, which will continue to affect other indicators. New Home Sales data is often volatile and difficult to predict. The data remains significant and can move mortgage interest rates.
Market Update 05/17/2010
Market Comment
Mortgage bond prices rose last week applying downward pressure on mortgage interest rates. The week started on negative footing when the European Union poured a trillion dollars into efforts to stabilize Greece. Stocks across the globe rallied at the expense of bonds. Fortunately that was short-lived, as traders remain concerned the efforts will not stop future economic turmoil in Europe.
Rates fell by about 1/4 of a discount point for the week.
The consumer price index Wednesday will be the most important event this week. The housing data, producer price index, and leading economic indicators data may also move the market.
LOOKING AHEAD
|
Economic |
Release |
Consensus |
|
| Producer Price Index |
Tuesday, May 18, |
Up 0.2%, |
Important. A measure of inflation at the producer level. Lower figures may lead to lower rates. |
| Housing Starts |
Tuesday, May 18, |
|
Important. A measure of housing sector strength. Larger than expected decreases may lead to lower rates. |
| Consumer Price Index |
Wednesday, May 19, |
Up 0.2%, |
Important. An indication of inflationary pressures at the consumer level. Decreases may lead to lower rates. |
| Weekly Jobless Claims |
Thursday, May 20, |
410k | Moderately important. An increase in claims may bring lower rates. |
| Leading Economic Indicators |
Thursday, May 20, |
Up 1.2% |
Important. An indication of future economic activity. A smaller increase may lead to lower rates. |
| Philadelphia Fed Survey |
Thursday, May 20, |
21.5 |
Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
Consumer Price IndexThe Consumer Price Index is widely accepted as the most important measure of inflation. The CPI is a measure of prices at the consumer level for a fixed basket of goods and services. The National Statistics Office and the Bureau of Agricultural Statistics of the Department of Agriculture collect price data for the computation of the CPI. Since it is an index number, it compares the level of prices to a base period. By comparing the level of the index at two different points in time, analysts can determine how much prices have risen in that period. Unlike other measures of inflation, which only factor domestically produced goods; the CPI takes into account imported goods as well. This is important due to the ever-increasing reliance of the US economy upon imported goods. Analysts primarily focus on the core rate of the CPI which factors out the more volatile food and energy prices.
Record debt levels continue to weigh heavily upon the financial markets. The health of the economy remains uncertain. The Fed has itself in a precarious position of wanting to stoke the economy amid the real possibility of increased inflation and increased debt loads.
Market participants expect the consumer price relatively tame this week. Inflation friendly data may lead to improvements in mortgage interest rates. However, unexpected consumer price spikes may push interest rates higher in the short-term. A cautious approach to float/lock decisions is prudent.
Market Update 05/10/2010
Market Comment
Mortgage bond prices rose last week pushing mortgage interest rates lower. Trading was once again dominated by foreign influences as the Greek debt concerns spread across the globe. US stocks fell precipitously Thursday afternoon. At one point the DOW was down over 900 points. This sent a flood of investor funds into mortgage bonds helping rates improve. The data for the week was mixed with higher than expected unemployment and a larger than expected payrolls figure. Oil prices fell to around $77/barrel, which helped alleviate inflation concerns. Rates fell by about 3/4 of a discount point for the week.The retail sales data Friday will be the most important event this week. The Treasury auctions will also take center stage as market participants cautiously await the result to determine foreign investor appetite for US debt instruments.LOOKING AHEAD
|
Economic |
Release |
Consensus |
|
| 3-year Treasury Note Auction |
Tuesday, May 11, |
None |
Important. $38 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Trade Data |
Wednesday, May 12, |
$39.5 billion deficit |
Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| 10-year Treasury Note Auction |
Wednesday, May 12, |
None |
Important. $24 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Weekly Jobless Claims |
Thursday, May 13, |
410k |
Moderately important. An increase in claims may bring lower rates. |
| 30-year Treasury Bond Auction |
Thursday, May 13, |
None |
Important. $16 billion of bonds will be auctioned. Strong demand may lead to lower mortgage rates. |
| Retail Sales |
Friday, March 14, |
Up 0.4% | Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates. |
| Industrial Production |
Friday, March 14, |
Up 0.5% |
Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates. |
| Capacity Utilization |
Friday, March 14, |
73.3% |
Important. A figure above 85% is viewed as inflationary. A decrease may lead to lower mortgage interest rates. |
| U Michigan Consumer Sentiment |
Friday, March 14, |
73 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Global UncertaintyThe inability of Greece to pay their debt continues to result in economic uncertainty across the globe. The recent announcement that Greece would receive aid from the other Euro members initially resulted in some stability. However, the aid package didn’t erase the concern that Greece could still default and the contagion may spread to other countries.
The positive for US dollar-denominated securities is the flight to quality buying that often occurs with the turmoil abroad. Investors often exit troubled markets and pour their money into US securities such as mortgage bonds. This pushes mortgage bond prices higher causing rates to fall in the short term. Unfortunately the improvements can evaporate just as quickly as they appear if the inverse flight occurs. With that in mind be cautious in the event the wild market swings continue.
Market Update 05/03/2010
Market Comment
Mortgage bond prices rose last week pushing mortgage interest rates lower. Trading was dominated by foreign influences as the Greek debt concerns spread throughout Europe. Analysts point to Spain and Portugal as additional areas of concern. Fortunately, this sent global investor funds into US Treasury bonds and mortgage-backed securities. This flight to quality buying helped rates improve this week. Weekly jobless claims came in as expected.
Rates fell by about 3/8 of a discount point for the week.
The employment report to be released Friday will be the most important event this week. The productivity data to be released Thursday also is a major release. It is important to remember that data releases often result in mortgage interest rate volatility.
LOOKING AHEAD
|
Economic |
Release |
Consensus |
|
| Personal Income and Outlays |
Monday, May 3, |
Up 0.2% Up 0.6% |
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| ISM Index |
Monday, May 3, |
59.6 |
Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Factory Orders |
Tuesday, May 4, |
Down 0.8% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| ADP Employment |
Wednesday, May 5, |
Jobs +20K | Important. An indication of employment. A large decrease in payrolls may bring lower rates. |
| Preliminary Q1 Productivity |
Thursday, May 6, |
Up 3.1% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| Employment |
Friday, May 7, |
Jobs +175K Umemp @ 9.7% |
Very important. An increase in unemployment or a large decrease in payrolls may bring lower rates. |
Income and Outlays
The personal income and outlays release is a monthly report issued by the Bureau of Economic Analysis (BEA). The data is important because it is thought to provide a solid indication of future consumer demand. The personal income component is primarily a measure of wages and salaries. The outlays component is primarily a measure of spending on goods and services. Together the figures provide analysts valuable insight into consumer economic standing and consumption.
The prior release showed wages and salaries were unchanged. Future decreases could adversely affect consumer spending and the entire US economy. Decreased or stagnant wages coupled with tighter borrowing restrictions make it difficult for consumers to spend money.
It is important to note that no single economic indicator can consistently predict the future of the economy. However, the personal income and outlays report is a closely watched release. The consumer remains a vital component of the US economy.
Now is a good time to take advantage of mortgage interest rates at their current levels to avoid exposure to future market volatility.
Market Update 04/26/2010
Market Comment
Mortgage bond prices fell last week pushing mortgage interest rates higher. The first portion of the week had very little data. Leading economic indictors came in stronger than expected which really didn’t help us. Strong stocks pressured mortgage bonds a bit. Producer prices rose more than expected but the core rate was tame. New home sales shocked the market with a 26.9% increase. This was the largest increase in 47 years and not bond friendly. Rates rose by about 3/8 of a discount point for the week.
The Fed meeting Wednesday will be the most important event this week. The Treasury auctions will also likely overshadow a lot of the other releases as traders digest record debt that continues to hit the market. Friday morning may be volatile as the employment cost index and gross domestic product data are very important releases.
LOOKING AHEAD
|
Economic |
Release |
Consensus |
|
| Consumer Confidence |
Tuesday, April 27, |
54.0 |
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| 2-year Treasury Note Auction |
Tuesday, April 27, |
None |
Important. $44 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| 5-year Treasury Note Auction |
Wednesday, April 28, |
None |
Important. $42 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Fed Meeting Adjourns |
Wednesday, April 28, |
No change |
Important. Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting. |
| Weekly Jobless Claims |
Thursday, April 29, |
455k |
Moderately important. An indication of employment. A larger figure may lead to lower rates. |
| 7-year Treasury Note Auction |
Thursday, April 29, |
None | Important. $32 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Q1 Advance GDP |
Friday, April 30, |
3.5% |
Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| Q1 Employment Cost Index |
Friday, April 30, |
Up 0.4% |
Very important. A measure of wage inflation. Weakness may lead to lower rates. |
| U of Michigan Consumer Sentiment |
Friday, April 30, |
72 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Consumer ConfidenceThe Conference Board releases the Consumer Confidence Index on the last Tuesday of every month. The report details the levels of confidence individual households have in the performance of the economy. The data is derived from a survey of 5,000 households nationwide. The survey polls consumer opinions on current business conditions, their jobs, their incomes, and their future spending plans.
The consumer confidence index is significant in that it provides a precursor into consumers’ willingness to spend in the months ahead. However, many analysts point out that willingness to spend does not always convert to actual expenditures.
This week’s release will be eagerly anticipated. Look for any variation from estimates to cause mortgage interest rate volatility. Signs of eroding consumer confidence could lead to improvements in mortgage interest rates. However, stronger than expected figures could spike rates higher.
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