Mortgage Market in Review – April 11, 2016

April 12, 2016
Market Comment

Mortgage bond prices finished the week near unchanged which kept rates in check.  Factory orders fell 1.7%. That data was near expectations and caused very little market movement.  The U.S. ran a trade deficit of $47B as expected.  Weekly jobless claims printed at 267K and continuing claims, a summation of all receiving benefits, was 2,191K. Expectations were for weekly claims at 270K and continuing claims at 2,170K.  This was one of the few weeks so far this year that rates did not swing one way or the other by more than approximately 1/8 of a discount point sometime throughout the week.  This was a sharp contrast to the volatility we saw last year and the beginning of this year.  Mortgage interest rates finished the week better by approximately 1/8 of a discount point.


LOOKING AHEAD

Economic
Indicator		 Release
Date & Time		 Consensus
Estimate
Analysis
3-year Treasury Note Auction Tuesday, April 12,
1:15 pm, et		 None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Producer Price Index Wednesday, April 13,
8:30 am, et		 Up 0.1%,
Core up 0.2%		 Important.  An indication of inflationary pressures at the producer level.  Weaker figures may lead to lower rates.
Retail Sales Wednesday, April 13,
8:30 am, et		 Up 0.4% Important.  A measure of consumer demand.  A smaller than expected increase may lead to lower mortgage rates.
10-year Treasury Note Auction Wednesday, April 13,
1:15 pm, et		 None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Consumer Price Index Thursday, April 14,
8:30 am, et		 Up 0.1%,
Core up 0.2%		 Important.  An indication of inflationary pressures at the consumer level.  Weaker figures may lead to lower rates.
Weekly Jobless Claims Thursday, April 14,
8:30 am, et		 265K Important.  An indication of employment.   Higher claims may result in lower rates.
30-year Treasury Bond Auction Thursday, April 14,
1:15 pm, et		 None Important.  Bonds will be auctioned.  Strong demand may lead to lower mortgage rates.
Industrial Production Friday, April 15,
9:15 am, et		 Up 0.2% Important.  A measure of manufacturing sector strength.  A lower than expected increase may lead to lower rates.
Capacity Utilization Friday, April 15,
9:15 am, et		 76.6% Important.  A figure above 85% is viewed as inflationary.  Weaker figure may lead to lower rates.

Producer Price Index

The producer price index is a measure of prices at the producer level and is important because it is the first inflation report to be released each month.  Investors are typically able to gain an initial indication of inflationary pressures from the release.  If producer prices are increasing, there is a tendency for producers to pass the increases on to consumers in the form of higher priced goods.  It is important to note that the PPI is only a measure of goods, while the consumer price index is a measure of goods and services.  It is possible for the price of goods to remain stable, while the price of services increases.  In this scenario PPI would do little to warn of a change in inflationary pressures, while the CPI report would provide an indication of the inflationary effects of the service component.

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