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Mortgage Market in Review – November 9, 2015

Market Comment

Mortgage bond prices finished the week sharply lower which jolted rates higher.  Trading was slightly negative the beginning of the week amid mixed data.  Weekly jobless claims were 276K versus the expected 262K.  Third quarter productivity increased 1.6% versus the expected 0.1% increase.  The biggest shock to rates came Friday morning with stronger than expected employment figures.  Unemployment was 5% and non-farm payrolls rose 271K.  Analysts expected a reading of 5.1% and 181K.  The financial headlines continued to focus on a Fed rate hike sooner rather than later.  The latest employment data strengthened that narrative.  Mortgage interest rates finished the week worse by about 5/8 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
3-year Treasury Note Auction Monday, Nov. 9,
1:15 pm, et
None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
10-year Treasury Note Auction Tuesday, Nov. 10,
1:15 pm, et
None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Veterans Day Wednesday, Nov.11 Bond market closed Important.  No trading Wednesday. Shortened trading week may lead to volatility when trading resumes Thursday.
Weekly Jobless Claims Thursday, Nov. 12,
8:30 am, et
272K Important.  An indication of employment.   Higher claims may result in lower rates.
30Y Treasury Bond Auction Thursday, Nov. 12,
1:15 pm, et
None Important.  Bonds will be auctioned.  Strong demand may lead to lower mortgage rates.
Producer Price Index Friday, Nov. 13,
8:30 am, et
Down 0.2%,
Core down 0.1%
Important.  An indication of inflationary pressures at the producer level.  Weaker figures may lead to lower rates.
Retail Sales Friday, Nov. 13,
8:30 am, et
Up 0.2% Important.  A measure of consumer demand.  A smaller than expected increase may lead to lower mortgage rates.
Business Inventories Friday, Nov. 13,
10:00 am, et
Up 0.1% Moderate importance.  An indication of stored-up capacity.  A significantly larger increase may lead to lower rates.
U of Michigan Consumer Sentiment Friday, Nov. 13,
10:00 am, et
89.8 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Business Inventories

The report on business inventories gives a broader look at the durable goods, factory orders, and retail sales reports. Not only is this report an important part of the investment component of the GDP, but it also provides additional evidence about the economy in the upcoming months. Changes in business inventories slow as the economy approaches a peak and rise as the economy approaches the trough of a recession. Therefore the change in business inventories is a leading indicator of GDP. The data for this report, which are published by the Department of Commerce’s Census Bureau, comes from a monthly survey of inventories, orders, and manufacturers’ shipments, in addition to the merchant wholesalers and retail trade surveys.

The data is a mid tier release.  However, in this environment every piece of data has the potential to cause volatility.

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