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Mortgage Market in Review – June 15, 2015

Market Comment

Mortgage bond prices finished the week near unchanged which kept rates in check. Trading was volatile despite no data until near the end of the week. News out of the eurozone focused on Greece. Greece released a new reform plan in an effort to extend the bailout. Creditors wanted to see more concessions. Weekly jobless claims were 279K versus the expected 277K. The higher than expected reading was rate friendly. Retail sales rose 1.2% versus the expected 1.1% increase. This was not rate friendly. The Treasury auctions were generally solid. The data Friday morning was mixed. The Producer price index rose 0.5% versus the expected 0.4% increase. The Core, which excludes volatile food and energy, rose 0.1% as expected. The initial reaction was slightly negative. Mortgage interest rates finished the week better by about 1/8 to 1/4 of a discount point.

LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Industrial Production Monday, June 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 Monday, June 15,
9:15 am, et
78.1% Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates.
NAHB Housing Index Monday, June 15,
10:00 am, et
55 Moderately Important. A measure of single family housing. Weakness may lead to lower mortgage rates.
Housing Starts Tuesday, June 16,
8:30 am, et
1185K Important. A measure of housing sector strength. Weakness may lead to lower rates.
Fed Meeting Adjourns Wednesday, June 17,
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.
Weekly Jobless Claims Thursday, June 18,
8:30 am, et
272K Important. An indication of employment. Higher claims may result in lower rates.
Consumer Price Index Thursday, June 18,
8:30 am, et
Up 0.1%,
Core up 0.1%
Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates.
Philadelphia Fed Survey Thursday, June 18,
10:00 am, et
6.8 Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
Leading Economic Indicators Thursday, June 18,
10:00 am, et
Up 0.4% Important. An indication of future economic activity. A smaller increase may lead to lower rates.

Fed Focus

The United States central bank, the Federal Reserve, coordinates the borrowing and lending activities of federally chartered banks. The principal reason the Federal Reserve was created was to reduce severe financial crises. One way of accomplishing this goal is to control the amount of money that flows through the economy. By manipulating the US money supply, the Fed influences inflation, unemployment, and the level of US economic activity. The Fed has a variety of tools that it uses to control the money supply, but its chief policy tool is the manipulation of short-term interest rates.No rate changes are expected at the Wednesday meeting but there is concern about the future. Many Fed officials have recently indicated a rate increases will occur this year. Their post meeting remarks will be carefully analyzed. Be cautious heading into this meeting.


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