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Mortgage Market in Review – June 13, 2016

Market Comment

Mortgage bond prices finished the week near unchanged which kept rates in check. Rate movements were limited for a change. Boston Fed President Rosengren said the recent employment report was “disappointing” but noted that it wasn’t a sign of a deteriorating economy. Productivity in Q1 fell 0.6% and labor costs rose 4.5%. That data was near expectations and resulted in very little market movement. All of the Treasury auctions showed solid foreign demand. Global economic concern played heavily into trading. A European central bank noted, “the global economy remains weak despite very stimulatory monetary policy and significant downside risks remain.” Weekly jobless claims were 264K, about as expected. Consumer sentiment was 94.3 versus the expected 94 reading. Mortgage interest rates finished the week near unchanged.

LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Retail Sales Tuesday, June 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, June 15,
8:30 am, et
Up 0.2%,
Core up 0.2%
Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates.
Industrial Production Wednesday, June 15,
9:15 am, et
Up 0.6% Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates.
Capacity Utilization Wednesday, June 15,
9:15 am, et
76.2% Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates.
Fed Meeting Adjourns Wednesday, June 15,
2:15 pm, et
No rate changes Important. Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting.
Consumer Price Index Thursday, June 16,
8:30 am, et
Up 0.4%,
Core up 0.2%
Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates.
Weekly Jobless Claims Thursday, June 16,
8:30 am, et
260K Important. An indication of employment. Higher claims may result in lower rates.
Philadelphia Fed Survey Thursday, June 16,
10:00 am, et
2.8 Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
Housing Starts Friday, June 17,
8:30 am, et
1182K Important. A measure of housing sector strength. Weakness may lead to lower 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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