Market Comment - Week of August 16th, 2010
Mortgage bond prices were higher last week applying downward pressure on mortgage rates. Turmoil and volatility remain high with wide swings occurring in both stocks and bonds on an almost daily basis. The economic outlook remains clouded at best. Weekly jobless claims and the trade deficit remained high, hindering recovery in the jobs market. As expected, the Federal Reserve will restart the quantitative easing program by purchasing Treasury bonds.
Rates fell by about 1/4 of a discount point for the week.
The most important data this week will be the Producer Price Index Tuesday. Housing starts and LEI data may also move the financial markets.
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Economic Factors
Economic Indicator Release Date Time Consensus Estimate Analysis
Housing Starts Tuesday, Aug. 17, 2010 Up 2.2% Important. A measure of housing sector strength. Weakness may lead to lower rates.
Producer Price Index Tuesday, Aug. 17, 2010 Up 0.2%, Core up 0.1% Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates.
Industrial Production Tuesday, Aug. 17, 2010 Up 0.5% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Capacity Utilization Tuesday, Aug. 17, 2010 74.5% Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates.
Weekly Jobless Claims Thursday, Aug. 19, 2010 450K Important. An indication of employment. An increase in jobless claims may bring lower rates.
Leading Economic Indicators Thursday, Aug. 19, 2010 Up 0.2% Important. An indication of future economic activity. Weakness may lead to lower rates.
Philadelphia Fed Survey Thursday, Aug. 19, 2010 5.10 Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
Fed Results
The Federal Open Market Committee kept rates unchanged last week at the historically low levels. The remarks following the meeting were bond friendly. They indicated the pace of economic recovery slowed in recent months. Inflation is expected to remain subdued for some time. Most importantly they confirmed the suspicions that they would restructure their quantitative easing actions in an effort to continue to keep rates low for an extended period of time and to spur the economy.
The Fed stated they would keep holdings of securities at current levels through reinvesting funds from maturing mortgage-backed securities into longer term US Treasuries. The Fed is concerned the recovery is waning and specifically noted that it was "more modest" than previously thought. Consumer spending increased gradually but there remain concerns that increasing unemployment along with tight credit conditions may limit increases in the future.
The Fed decision was a result of a 9-1 vote as the lone dissenter disagreed with stance of keeping rates low for an extended period of time. He was concerned that position would limit the Fed's ability to raise rates in the future and also disagreed with the quantitative easing program.
Interest rates remain historically favorable. The demand for bonds remains high pushing rates lower. Anytime prices rise substantially there is always a danger of a correction. The big unknown is if or when that correction may come. For now it remains wise to take advantage of mortgage interest rates at their current levels.
Monday, August 16, 2010
Thursday, August 5, 2010
Monday, August 2, 2010
Mortgage Rate Indicator for Dallas
Market Comment - Week of August 2nd, 2010
Mortgage bond prices rose last week pushing mortgage interest rates lower. Tame inflation readings and lower than expected US economic growth figures helped mortgage interest rates remain very favorable. The employment cost index came in as expected while the gross domestic product data showed a smaller than expected increase. The Treasury auctions generally went well and trading in stocks remained choppy.
Rates fell by about 3/8 to 1/2 of a discount point for the week.
The most important data this week will be the employment report Friday. PCE inflation data and ADP employment may also move the markets.
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Economic Factors
Economic Indicator Release Date Time Consensus Estimate Analysis
Construction Spending Monday, Aug. 2, 2010 Down 1.0% Low importance. An indication of economic strength. A significant decrease may lead to lower rates.
ISM Index Monday, Aug. 2, 2010 53.5 Important. A measure of manufacturer sentiment. A large decline may lead to lower mortgage rates.
Personal Income and Outlays Tuesday, Aug. 3, 2010 Income up 0.2%, Outlays up 0.1% Important. A measure of consumers' ability to spend. Weakness may lead to lower mortgage rates.
PCE Core Tuesday, Aug. 3, 2010 Up 0.1% Important. An indication of inflation. A lower figure may lead to lower rates.
Factory Orders Tuesday, Aug. 3, 2010 Up 0.8% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
ADP Employment Wednesday, Aug. 4, 2010 Up 30k Important. An indication of employment. Weakness in payrolls may bring lower rates.
Employment Friday, Aug. 6, 2010 Unemp. @ 9.6%, Payrolls -116k Very important. An increase in unemployment or a large decrease in payrolls may bring lower rates.
Consumer Credit Friday, Aug. 6, 2010 Down $3b Low importance. A significantly large increase may lead to lower mortgage interest rates.
Core PCE
The US Department of Commerce's Bureau of Economic Analysis releases the core PCE price index. The report provides the average increase in costs for personal consumption expenditures excluding food and energy. As of July 2009 the figure now includes food services in the figure.
The report is significant in that the Fed uses the PCE in determining inflation as opposed to the prior use of the consumer price index. The reports vary in that the CPI uses a predetermined pricing of a basket of goods and services for several years while the PCE data uses pricing of expenditures the changes from quarter to quarter. An important difference is also the fact that PCE includes the price of spending for and on behalf of households. This includes health care spending paid for a household by a business. The CPI only reflects out of pocket expenses paid directly by consumers.
While inflation fears remain subdued as of late there are concerns that inflation could eventually emerge. Taking advantage of rates at these historically low levels makes sense with so much uncertainty in the US economy.
Mortgage bond prices rose last week pushing mortgage interest rates lower. Tame inflation readings and lower than expected US economic growth figures helped mortgage interest rates remain very favorable. The employment cost index came in as expected while the gross domestic product data showed a smaller than expected increase. The Treasury auctions generally went well and trading in stocks remained choppy.
Rates fell by about 3/8 to 1/2 of a discount point for the week.
The most important data this week will be the employment report Friday. PCE inflation data and ADP employment may also move the markets.
--------------------------------------------------------------------------------
Economic Factors
Economic Indicator Release Date Time Consensus Estimate Analysis
Construction Spending Monday, Aug. 2, 2010 Down 1.0% Low importance. An indication of economic strength. A significant decrease may lead to lower rates.
ISM Index Monday, Aug. 2, 2010 53.5 Important. A measure of manufacturer sentiment. A large decline may lead to lower mortgage rates.
Personal Income and Outlays Tuesday, Aug. 3, 2010 Income up 0.2%, Outlays up 0.1% Important. A measure of consumers' ability to spend. Weakness may lead to lower mortgage rates.
PCE Core Tuesday, Aug. 3, 2010 Up 0.1% Important. An indication of inflation. A lower figure may lead to lower rates.
Factory Orders Tuesday, Aug. 3, 2010 Up 0.8% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
ADP Employment Wednesday, Aug. 4, 2010 Up 30k Important. An indication of employment. Weakness in payrolls may bring lower rates.
Employment Friday, Aug. 6, 2010 Unemp. @ 9.6%, Payrolls -116k Very important. An increase in unemployment or a large decrease in payrolls may bring lower rates.
Consumer Credit Friday, Aug. 6, 2010 Down $3b Low importance. A significantly large increase may lead to lower mortgage interest rates.
Core PCE
The US Department of Commerce's Bureau of Economic Analysis releases the core PCE price index. The report provides the average increase in costs for personal consumption expenditures excluding food and energy. As of July 2009 the figure now includes food services in the figure.
The report is significant in that the Fed uses the PCE in determining inflation as opposed to the prior use of the consumer price index. The reports vary in that the CPI uses a predetermined pricing of a basket of goods and services for several years while the PCE data uses pricing of expenditures the changes from quarter to quarter. An important difference is also the fact that PCE includes the price of spending for and on behalf of households. This includes health care spending paid for a household by a business. The CPI only reflects out of pocket expenses paid directly by consumers.
While inflation fears remain subdued as of late there are concerns that inflation could eventually emerge. Taking advantage of rates at these historically low levels makes sense with so much uncertainty in the US economy.
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