Mortgage Market in Review – May 16, 2016

May 16, 2016
Market Comment

Mortgage bond prices finished the week slightly lower which pushed rates higher. Rates seesawed back and forth throughout the week within a very narrow range. The Treasury auctions gained more attention early in the week amid no data. The auctions were generally solid except for some mixed demand for the 30 year offering. Stocks were volatile throughout the week. The DOW closed up over 200 points Tuesday only to close down over 200 points Wednesday. Weekly jobless claims were higher than expected at 294K versus 270K. Unfortunately we saw no rate decreases in response. Producer prices rose 0.2% versus the expected 0.3% increase. The core rose 0.1% as expected. Mortgage interest rates finished the week worse by approximately 1/8 to 1/4 of a discount point.

LOOKING AHEAD

Economic
Indicator		 Release
Date & Time		 Consensus
Estimate
Analysis
NAHB Housing Index Monday, May 16,
10:00 am, et		 58.5 Moderately Important. A measure of single family housing. Weakness may lead to lower mortgage rates.
Consumer Price Index Tuesday, May 17,
8:30 am, et		 Up 0.2%,
Core up 0.1%		 Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates.
Housing Starts Tuesday, May 17,
8:30 am, et		 1092K Important. A measure of housing sector strength. Weakness may lead to lower rates.
Industrial Production Tuesday, May 17,
9:15 am, et		 Down 0.2% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Capacity Utilization Tuesday, May 17,
9:15 am, et		 74.4% Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates.
Fed Minutes Wednesday, May 18,
2:00 pm, et		 None Important. Details of the last Fed meeting will be thoroughly analyzed.
Weekly Jobless Claims Thursday, May 19,
8:30 am, et		 284K Important. An indication of employment. Higher claims may result in lower rates.
Philadelphia Fed Survey Thursday, May 19,
10:00 am, et		 -1.4 Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.

Fed Minutes

The Federal Open Market Committee decided in December of 2004 to reduce the lag time between the open market committee meeting and the release of the minutes from six to eight weeks to only three weeks. The minutes from the meeting have the ability to cause mortgage interest rate volatility because they provide more policy details than the standard post meeting release. Most importantly the minutes provide the Fed’s complete economic analysis and the various opinions of individual Fed members. There is typically an overwhelming consensus among the members. However, there can also be dissension, which often causes uneasiness in the financial markets. In the past the release often came and went without much uproar. Lately the financial markets have been so uncertain that every piece of data receives some reaction. Keep in mind that if any of the text seems troubling to analysts you can see market volatility.

Remember that mortgage interest rates remain historically favorable. Capitalizing on current rates is a sure thing.

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