Market Comment - Week of July 26th, 2010
Mortgage bond prices rose last week pushing mortgage interest rates lower. Higher than expected weekly jobless claims and continued claims helped mortgage interest rates remain very favorable. Higher than expected existing home sales and leading economic indicators data prevented rates from improving dramatically. Stocks remained volatile, which also resulted in some mortgage interest rate volatility.
Rates fell by about 1/8 of a discount point for the week.
The most important data will be the gross domestic product and employment cost index. The Treasury auctions may also result in mortgage interest rate volatility as foreign appetite for US debt instruments is gauged.
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Economic Factors
Economic Indicator Release Date Time Consensus Estimate Analysis
New Home Sales Monday, July 26, 2010 Up 12.6% Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
Consumer Confidence Tuesday, July 27, 2010 51.5 Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.
2-year Treasury Note Auction Tuesday, July 27, 2010 None Important. $38 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Durable Goods Orders Wednesday, July 28, 2010 Up 1.25% Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates.
5-year Treasury Note Auction Wednesday, July 28, 2010 None Important. $37 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
7-year Treasury Note Auction Thursday, July 29, 2010 None Important. $29 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Fed "Beige Book" Thursday, July 29, 2010 None Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates.
Q2 Advance GDP Friday, July 30, 2010 Up 2.5% Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
Fed "Beige Book"
The Fed "Beige Book" is a summary of economic conditions from each of the 12 Federal Reserve regional districts. The release takes place eight times a year approximately two weeks ahead of each of the Federal Open Market Committee meetings. The report is used at the FOMC meetings, which tends to be one of the most influential events in the market.
Market participants are continually attempting to determine what FOMC interest rate policy will be ahead of the next meeting. Any deviation from expectations usually results in extreme short-term market volatility. The timing of the "Beige Book" provides analysts a valuable look at one of the many factors the FOMC consider.
Monday, July 26, 2010
Tuesday, July 20, 2010
Mortgage Rate Indicator for Dallas
Market Comment - Week of July 19th, 2010
Mortgage bond prices rose pushing mortgage interest rates lower. Retail sales figures came in lower than expected with a 0.5% decrease. The Treasury auctions were mixed but didn't result in much volatility. Inflation generally remained in check as the producer price index fell 0.5%, lower than the expected 0.2% decline. Core consumer prices were slightly higher than expected with a 0.2% increase. Weekly jobless claims were not as bad as expected but continued claims increased which was bond friendly. Significant stock weakness Friday helped mortgage interest rates improve. Rates fell by about 5/8 of a discount point for the week.
The most important data will be the housing starts Tuesday. Weekly jobless claims and leading economic indicators data will also be important. Be cautious in this normally lackluster mid-summer trading environment as stocks remain very volatile and economic conditions remain uncertain.
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Economic Factors
Economic Indicator
Release Date Time
Consensus Estimate
Analysis
Housing Starts
Tuesday, July 20, 2010
Down 0.5%
Important. A measure of housing sector strength. Weakness may lead to lower rates.
Weekly Jobless Claims
Thursday, July 22, 2010
420k
Important. An indication of employment. Higher claims may result in lower rates.
Existing Home Sales
Thursday, July 22, 2010
Down 9.7%
Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
Leading Economic Indicators
Thursday, July 22, 2010
Down 0.4%
Important. An indication of future economic activity. Weakness may lead to lower rates.
Housing Starts
Housing starts data is a leading indicator of the state of our economy. This report, provided by the Bureau of the Census, takes into account data from both single-family homes and multi-family dwellings. Building permits are also released with the housing starts data. By knowing the number of permits issued monthly, analysts can attempt to estimate for the upcoming months. Normally, starts are 10% higher than permits since all locations are not required to have a building permit.
Housing starts and permits give a warning of future economic activity. In effect, a rise in housing starts can lead to a fall in the bond market and vice versa. Consumers tend to hold off on the purchase of new homes, new cars, and other big-ticket items if they are worried about the future of the economy. Housing is an important part of our economy. Continued declines in housing starts can lead to continued economic slowdown and essentially a deeper recession. On the other hand, increases in housing starts could signal a possible reversal.
From the opposite perspective, changes in interest rates often lead to changes in housing starts. High interest rates can cause a significant decline in home sales, which can lead to a drop in housing starts. Just the opposite happens when rates drop and is one of the additional reasons the Fed is trying to keep rates low. Low mortgage rates affect both home sales and housing starts.
The housing market across the country is a vital component in sustaining the economy. The continued weakness of the housing market has many worried. Many economists believe housing will continue to suffer.
There is still uncertainty regarding the future state of the economy. The Fed minutes indicate growth expectations are lower. The Fed Chairman has stated that the timing of an economic recovery was "highly uncertain."
Mortgage interest rates are historically low. A cautious approach is wise to protect against future volatility. Rates could head lower but there are no guarantees. We all remember the housing price corrections that came when many people thought prices would only go higher. While rate spikes are not expected any time soon, they are still a lingering possibility.
Mortgage bond prices rose pushing mortgage interest rates lower. Retail sales figures came in lower than expected with a 0.5% decrease. The Treasury auctions were mixed but didn't result in much volatility. Inflation generally remained in check as the producer price index fell 0.5%, lower than the expected 0.2% decline. Core consumer prices were slightly higher than expected with a 0.2% increase. Weekly jobless claims were not as bad as expected but continued claims increased which was bond friendly. Significant stock weakness Friday helped mortgage interest rates improve. Rates fell by about 5/8 of a discount point for the week.
The most important data will be the housing starts Tuesday. Weekly jobless claims and leading economic indicators data will also be important. Be cautious in this normally lackluster mid-summer trading environment as stocks remain very volatile and economic conditions remain uncertain.
--------------------------------------------------------------------------------
Economic Factors
Economic Indicator
Release Date Time
Consensus Estimate
Analysis
Housing Starts
Tuesday, July 20, 2010
Down 0.5%
Important. A measure of housing sector strength. Weakness may lead to lower rates.
Weekly Jobless Claims
Thursday, July 22, 2010
420k
Important. An indication of employment. Higher claims may result in lower rates.
Existing Home Sales
Thursday, July 22, 2010
Down 9.7%
Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
Leading Economic Indicators
Thursday, July 22, 2010
Down 0.4%
Important. An indication of future economic activity. Weakness may lead to lower rates.
Housing Starts
Housing starts data is a leading indicator of the state of our economy. This report, provided by the Bureau of the Census, takes into account data from both single-family homes and multi-family dwellings. Building permits are also released with the housing starts data. By knowing the number of permits issued monthly, analysts can attempt to estimate for the upcoming months. Normally, starts are 10% higher than permits since all locations are not required to have a building permit.
Housing starts and permits give a warning of future economic activity. In effect, a rise in housing starts can lead to a fall in the bond market and vice versa. Consumers tend to hold off on the purchase of new homes, new cars, and other big-ticket items if they are worried about the future of the economy. Housing is an important part of our economy. Continued declines in housing starts can lead to continued economic slowdown and essentially a deeper recession. On the other hand, increases in housing starts could signal a possible reversal.
From the opposite perspective, changes in interest rates often lead to changes in housing starts. High interest rates can cause a significant decline in home sales, which can lead to a drop in housing starts. Just the opposite happens when rates drop and is one of the additional reasons the Fed is trying to keep rates low. Low mortgage rates affect both home sales and housing starts.
The housing market across the country is a vital component in sustaining the economy. The continued weakness of the housing market has many worried. Many economists believe housing will continue to suffer.
There is still uncertainty regarding the future state of the economy. The Fed minutes indicate growth expectations are lower. The Fed Chairman has stated that the timing of an economic recovery was "highly uncertain."
Mortgage interest rates are historically low. A cautious approach is wise to protect against future volatility. Rates could head lower but there are no guarantees. We all remember the housing price corrections that came when many people thought prices would only go higher. While rate spikes are not expected any time soon, they are still a lingering possibility.
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