Market Comment
Mortgage bond prices finished the week slightly higher which pushed rates a bit lower. Trading started on a positive note early in the week amid weak stocks. There was no data until the end of the week but we had several Treasury auctions that were near average. Weekly jobless claims were 282K. Analysts expected claims at 270K. The initial reaction was muted as traders already priced in the fact that the Fed is poised to raise rates. Retail sales rose 0.2% versus the expected 0.3%. However, the ex-autos figure rose 0.4% versus the expected 0.3% increase. The producer price index showed some signs of inflation. PPI rose 0.3% versus the expected unchanged reading. The core, which excludes volatile food and energy, rose 0.3% versus the expected 0.1% increase. Mortgage interest rates finished the week better by approximately 1/4 to 3/8 of a discount point.
Philadelphia Fed Federal Reserve Banks were created to control the central banking system of the United States. The banks are divided into 12 districts and facilitate the monetary system by moving currency in and out of circulation in accordance with the policies set by the Federal Open Market Committee. The Reserve Banks handle check processing, hold cash reserves and make loans to depository institutions. Each Reserve Bank regulates commercial banks in their district. The twelve districts include Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. The Philadelphia Fed report is a survey of manufacturing businesses in the Northeast region. The report is valuable due to the timing. It is released before the month is over and is the second regional report released. While there are many other regional reports throughout the month the Philadelphia Fed report is considered to be one of the most valuable. It has historically shown strong correlation with purchasing managers index data and therefore analysts give it considerable attention.
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