Market Comment - Week of June 28th, 2010
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.
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Economic Factors
Economic Indicator
Release Date Time
Consensus Estimate
Analysis
Personal Income and Outlays
Monday, June 28, 2010
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, 2010
62.
Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.
ADP Employment
Wednesday, June 30, 2010
+56K
Important. An indication of the employment. Weakness in payrolls may bring lower rates.
ISM Index
Thursday, July 1, 2010
58.8
Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
Employment
Friday, July 2, 2010
Jobs -70K, Unemp @ 9.7%
Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
Factory Orders
Friday, July 2, 2010
-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.
Tuesday, June 29, 2010
Monday, June 21, 2010
Dallas Mortgage Rate Indicator
Market Comment - Week of June 21st, 2010
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.
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Economic Factors
Economic Indicator Release Date Time Consensus Estimate Analysis
Existing Home Sales Tuesday, June 22, 2010 Up 4.3% Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
New Home Sales Wednesday, June 23, 2010 Down 4.8% Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
Fed Meeting Adjourns Wednesday, June 23, 2010 No change Important. No rate changes are expected but some volatility may surround the adjournment of this meeting.
Durable Goods Orders Thursday, June 24, 2010 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, 2010 460k Important. An indication of US employment situation. A higher figure should help rates.
Preliminary Q1 GDP Friday, June 25, 2010 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, 2010 75.2 Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.
Fed Meeting
The 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.
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.
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Economic Factors
Economic Indicator Release Date Time Consensus Estimate Analysis
Existing Home Sales Tuesday, June 22, 2010 Up 4.3% Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
New Home Sales Wednesday, June 23, 2010 Down 4.8% Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
Fed Meeting Adjourns Wednesday, June 23, 2010 No change Important. No rate changes are expected but some volatility may surround the adjournment of this meeting.
Durable Goods Orders Thursday, June 24, 2010 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, 2010 460k Important. An indication of US employment situation. A higher figure should help rates.
Preliminary Q1 GDP Friday, June 25, 2010 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, 2010 75.2 Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.
Fed Meeting
The 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.
Wednesday, June 16, 2010
Race for a Cure
Here we are doing the Race for the Cure this past Saturday at the Shops at Legacy in Plano, Texas.
Monday, June 14, 2010
Mortgage Rate Indicators for Dallas
Market Comment - Week of June 14th, 2010
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.
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Economic Factors
Economic Indicator
Release Date Time
Consensus Estimate
Analysis
Housing Starts
Wednesday, June 16, 2010
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, 2010
Down 0.4%, Core up 0.1%
Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates.
Industrial Production
Wednesday, June 16, 2010
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, 2010
74.2%
Important. A figure above 85% is viewed as inflationary. A decrease may lead to lower rates.
Weekly Jobless Claims
Thursday, June 17, 2010
450K
Important. An indication of US employment situation. A higher figure should help rates.
Consumer Price Index
Thursday, June 17, 2010
Down 0.1%, Core up 0.1%
Important. A measure of inflation at the consumer level. Lower figures may lead to lower rates.
Leading Economic Indicators
Thursday, June 17, 2010
Up 0.4%
Important. An indication of future economic activity. A smaller increase may lead to lower rates.
Philadelphia Fed Survey
Thursday, June 17, 2010
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.
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.
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Economic Factors
Economic Indicator
Release Date Time
Consensus Estimate
Analysis
Housing Starts
Wednesday, June 16, 2010
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, 2010
Down 0.4%, Core up 0.1%
Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates.
Industrial Production
Wednesday, June 16, 2010
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, 2010
74.2%
Important. A figure above 85% is viewed as inflationary. A decrease may lead to lower rates.
Weekly Jobless Claims
Thursday, June 17, 2010
450K
Important. An indication of US employment situation. A higher figure should help rates.
Consumer Price Index
Thursday, June 17, 2010
Down 0.1%, Core up 0.1%
Important. A measure of inflation at the consumer level. Lower figures may lead to lower rates.
Leading Economic Indicators
Thursday, June 17, 2010
Up 0.4%
Important. An indication of future economic activity. A smaller increase may lead to lower rates.
Philadelphia Fed Survey
Thursday, June 17, 2010
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.
Tuesday, June 1, 2010
Mortgage Rate Indicators for Dallas
Market Comment - Week of May 31th, 2010
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.
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Economic Factors
Economic Indicator Release Date Time Consensus Estimate Analysis
Construction Spending Tuesday, June 1, 2010 Up 0.1% Low importance. An indication of economic strength. A significant decrease may lead to lower rates.
ISM Index Tuesday, June 1, 2010 58.9 Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, June 3, 2010 Up 50k Important. An indication of employment. Weakness in payrolls may bring lower rates.
Revised Q1 Productivity Wednesday, June 3, 2010 Up 3.6% Important. A measure of output per hour. Improvement may lead to lower mortgage rates.
Weekly Jobless Claims Thursday, June 4, 2010 455k Moderately Important. A measure of unemployment. Higher claims may bring lower rates.
Factory Orders Thursday, June 4, 2010 Up 1.1% Important. A measure of manufacturing sector strength. A larger decrease may lead to lower rates.
Employment Friday, June 5, 2010 Unemp. @ 9.8%, Payrolls +500k Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
ADP Employment
The 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.
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.
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Economic Factors
Economic Indicator Release Date Time Consensus Estimate Analysis
Construction Spending Tuesday, June 1, 2010 Up 0.1% Low importance. An indication of economic strength. A significant decrease may lead to lower rates.
ISM Index Tuesday, June 1, 2010 58.9 Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, June 3, 2010 Up 50k Important. An indication of employment. Weakness in payrolls may bring lower rates.
Revised Q1 Productivity Wednesday, June 3, 2010 Up 3.6% Important. A measure of output per hour. Improvement may lead to lower mortgage rates.
Weekly Jobless Claims Thursday, June 4, 2010 455k Moderately Important. A measure of unemployment. Higher claims may bring lower rates.
Factory Orders Thursday, June 4, 2010 Up 1.1% Important. A measure of manufacturing sector strength. A larger decrease may lead to lower rates.
Employment Friday, June 5, 2010 Unemp. @ 9.8%, Payrolls +500k Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
ADP Employment
The 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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