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Mortgage Market in Review – August 10, 2015

Market Comment

Mortgage bond prices finished the week lower which pushed rates higher. Rates were positive the beginning of the week amid mixed data. Personal Income rose 0.4% versus the expected 0.3% increase which was not rate friendly. Spending rose 0.2% and the PCE Core rose 0.1% both as expected. The ISM Index was 52.7 versus the expected 54.1 which was rate friendly. Factory orders rose 1.8% as expected. Rates shot higher Tuesday and early Wednesday tied to remarks from a Fed official about a possible September rate hike. Unemployment was 5.3% as expected and payrolls rose 215K versus the expected 223K increase. Mortgage interest rates finished the week worse by about 1/4 of a discount point.

LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Preliminary Q2 Productivity Tuesday, Aug. 11,
8:30 am, et
Up 0.2% Important. A measure of output per hour. Improvement may lead to lower mortgage rates.
3-year Treasury Note Auction Tuesday, Aug. 11,
1:15 pm, et
None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
10-year Treasury Note Auction Wednesday, Aug. 12
1:15 pm, et
None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims Thursday, Aug. 13,
8:30 am, et
268K Important. An indication of employment. Higher claims may result in lower rates.
Retail Sales Thursday, Aug. 13,
8:30 am, et
Up 0.2% Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates.
30-year Treasury Bond Auction Thursday, Aug. 13,
1:15 pm, et
None Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
Producer Price Index Friday, Aug. 14,
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.
Industrial Production Friday, Aug. 14,
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, Aug. 14,
9:15 am, et
78.2% Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates.
U of Michigan Consumer Sentiment Friday, Aug. 14,
10:00 am, et
93.5 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Warning

Federal Reserve Board member Lockhart issued significant sentiments to the financial markets last week in an interview with the Wall Street Journal. Lockhart said, “I’m not seeing any significant indication that we are losing ground or that we are in some way falling off the basic track that I have been describing for quite some time. In that sense I think the economy is performing at a quite satisfactory level.” He went on to note that a September rate increase by the Fed was still up in the air but “I have said publicly before that I lean toward September and I am still very open to a September move.” That comment put some upward pressure on mortgage rates. Expect more volatility in the months ahead.


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