Mortgage Market in Review – July 13, 2015

July 14, 2015
Market Comment

Mortgage bond prices finished the week lower which put upward pressure on rates. Rates were positive the first portion of the week tied to Greek debt concerns. Investors feared uncertainty in the eurozone which resulted in flight to quality buying of MBSs. The Greek Finance Minister resigned after Greek voters rejected a proposal that required more austerity measures. Trading was volatile the rest of the week amid little data and various news reports about progress toward a Greek debt restructuring agreement. Weekly jobless claims were 297K versus the expected 275K. This was rate friendly but did little to counter the eurozone developments. Stocks also experienced volatility with 100 point swings from day to day. Mortgage interest rates finished the week worse by about 1/8 to 1/4 of a discount point.

LOOKING AHEAD

Economic
Indicator		 Release
Date & Time		 Consensus
Estimate
Analysis
Retail Sales Tuesday, July 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.
Producer Price Index Wednesday, July 15,
8:30 am, et		 Up 0.4%,
Core up 0.1%		 Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates.
Industrial Production Wednesday, July 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 Wednesday, July 15,
9:15 am, et		 78.2% Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates.
Fed “Beige Book” Wednesday, July 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, July 16,
8:30 am, et		 288K Important. An indication of employment. Higher claims may result in lower rates.
Consumer Price Index Friday, July 17,
8:30 am, et		 Up 0.3%,
Core up 0.1%		 Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates.
Housing Starts Friday, July 17,
8:30 am, et		 997K Important. A measure of housing sector strength. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment Friday, July 17,
10:00 am, et		 95.8 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Retail Sales

Retail sales data is the first indication of weakness or strength in consumer spending released each month. The Bureau of the Census of the US Department of Commerce provides information on how much the consumer spends on the purchase of goods. This data provides the consumption part of the gross domestic product. Retail sales data represents merchandise sold for cash or credit by retailers. Durable goods, such as autos, make up 35% of the figure. The balance consists of non-durables such as gasoline, restaurants, and general merchandise. There are several drawbacks to the report. The data covers purchases of goods only, not services. It is also not adjusted for inflation and is extremely volatile. Economists are concerned that the current economic uncertainty will curtail consumer spending.

 


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