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Mortgage Market in Review – April 13, 2015

Market Comment

Mortgage bond prices finished the week lower, which pushed mortgage interest rates higher. Rates were negative the first portion of the week amid thin trade and strong stocks. News out of the eurozone showed strength in that region. Their purchasing managers’ index reported the best economic growth since 2011. The 10 Year Treasury note auction was average. The 30 Year Treasury bond auction was mixed with a weaker than expected bid to cover and better than average foreign demand. Weekly jobless claims were 281K versus the expected 285K. The market reacted very little to the release. Mortgage interest rates finished the week worse by approximately 1/4 of a discount point.

LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Retail Sales Tuesday, April 14,
8:30 am, et
Up 0.6% Important.  A measure of consumer demand.  A smaller than expected increase may lead to lower mortgage rates.
Producer Price Index Tuesday, April 14,
8:30 am, et
Unchanged,
Core up 0.1%
Important.  An indication of inflationary pressures at the producer level.  Lower figures may lead to lower rates.
Industrial Production Wednesday, April 15,
9:15 am, et
Up 0.1% Important.  A measure of manufacturing sector strength.  Weakness may lead to lower rates.
Capacity Utilization Wednesday, April 15,
9:15 am, et
78.7% Important.  A figure above 85% is viewed as inflationary.  Weakness may lead to lower rates.
Fed “Beige Book” Wednesday, April 15,
2:00 pm, et
None Important.  This Fed report details current economic conditions across the US.  Signs of weakness may lead to lower rates.
Weekly Jobless Claims Thursday, April 16,
8:30 am, et
283k Important.  An indication of employment.   Higher claims may result in lower rates.
Housing Starts Thursday, April 16,
8:30 am, et
903k Important.  A measure of housing sector strength.  Weakness may lead to lower rates.
Philadelphia Fed Survey Thursday, April 16,
10:00 am, et
5.0 Moderately important.  A survey of business conditions in the Northeast.  Weakness may lead to lower rates.
Consumer Price Index Friday, April 17,
8:30 am, et
Up 0.2%,
Core up 0.2%
Important.  A measure of inflation at the consumer level.  Lower than expected increases may lead to lower rates.
U of Michigan Consumer Sentiment Friday, April 17,
10:00 am, et
92.8 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage 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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