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Mortgage Market In Review – January 12, 2015

Market Comment

Mortgage bond prices finished the week near unchanged which kept rates in check. Rates were positive the first portion of the week in response to a strong stock selloff Monday and Tuesday. This reversed Wednesday morning in response to the data. ADP employment came in at 241K versus the expected 230K mark and rates worsened. The rate increases continued into Thursday morning as stocks rebounded. Weekly jobless claims were 294K versus the expected 290K. This was rate friendly but not enough to stem the selling pressure that followed the run up in prices earlier in the week and rates were worse Thursday morning. The employment report was mixed (see results below) and rates were positive Friday morning. Mortgage interest rates finished the week unchanged to better by approximately 1/8 of a discount point.


Date & Time

Retail Sales Wednesday, Jan. 14,
8:30 am, et
Up 1.4% Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates.
Fed “Beige Book” Wednesday, Jan. 14,
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, Jan. 15,
8:30 am, et
287k Important. An indication of employment. Higher claims may result in lower rates.
Producer Price Index Thursday, Jan. 15,
8:30 am, et
Down 0.1%,
Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates.
Philadelphia Fed Survey Thursday, Jan. 15,
10:00 am, et
14.5 Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
Consumer Price Index Friday, Jan. 16,
8:30 am, et
Down 0.1%,
Core up 0.1%
Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates.
Industrial Production Friday, Jan. 16,
9:15 am, et
Up 0.3% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Capacity Utilization Friday, Jan. 16,
9:15 am, et
79.9% Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment Friday, Jan. 16,
10:00 am, et
93.4 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Weaker Wages

The December employment report came in mixed with strong headline figures and weaker underlining data. Unemployment came in at 5.6% versus the expected 5.7%. Non-farm Payrolls rose 252K versus the expected 240K increase. Average hourly earnings fell 0.2% versus the expected 0.2% increase. This figure was very rate friendly and received most of the focus.

Usually rates would spike on those headline figures but the Fed was one step ahead. Chicago Fed President Evans spoke during the release and indicated, “I don’t think we should be in a hurry to raise rates.” He went on to note that wages need to increase which brought the market focus to the wage component of the morning report. The fortunate consequence was rates were slightly positive Friday morning.


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