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Mortgage Market in Review – October 12, 2015

Market Comment

Mortgage bond prices finished the week sharply lower which pushed rates higher. Stock strength pressured rates higher Monday morning. The U.S. trade deficit jumped 16% to $48.3B in August versus the expected $44.5B. Weekly jobless claims were 263K versus the expected 275K which was not rate friendly. The minutes of the last Fed meeting were dovish. Fed officials indicated a concern that a premature rate hike would hurt economic recovery. Unfortunately the MBS market received very little positive response from the release. Mortgage interest rates finished the week worse by about 5/8 of a discount point.


Date & Time

Producer Price Index Wednesday, Oct. 14,
8:30 am, et
Up 0.1%,
Core up 0.2%
Important.  An indication of inflationary pressures at the producer level.  Weaker figures may lead to lower rates.
Retail Sales Wednesday, Oct. 14,
8:30 am, et
Up 0.2% Important.  A measure of consumer demand.  A smaller than expected increase may lead to lower mortgage rates.
Fed “Beige Book” Wednesday, Oct. 14,
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, Oct. 15,
8:30 am, et
268K Important.  An indication of employment.   Higher claims may result in lower rates.
Consumer Price Index Thursday, Oct. 15,
8:30 am, et
Down 0.1%,
Core up 0.1%
Important.  A measure of inflation at the consumer level.  Lower than expected figures may lead to lower rates.
Philadelphia Fed Survey Thursday, Oct. 15,
10:00 am, et
-4.8 Moderately important.  A survey of business conditions in the Northeast.  Weakness may lead to lower rates.
Industrial Production Friday, Oct. 16,
9:15 am, et
Up 0.1% Important.  A measure of manufacturing sector strength.  Weakness may lead to lower rates.
Capacity Utilization Friday, Oct. 16,
9:15 am, et
77.7% Important.  A figure above 85% is viewed as inflationary.  Weakness may lead to lower rates.
U of Michigan Consumer Sentiment Friday, Oct. 16,
10:00 am, et
88.8 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Market Conditions

There is a Chinese proverb that states, “May you live in interesting times.” It is often argued that the word interesting is meant to be a synonym for turbulent or dangerous. This phrase hits the bull’s-eye given the current state of the financial markets. Stocks continue to trade in the extreme but the future of the economy remains uncertain.

Many traders are concerned about future Fed rate increases. The Fed has difficult decisions to make. They went from warning of a summer rate hike to now warning about a hike before the end of the year. Current market odds are less than 50% that a rate hike will occur in 2015. The specific timing is everything. The last thing the Fed wants to do is stifle the economic recovery they have worked so hard to produce. Interest rates for conforming and FHA/VA loans remain low despite some recent volatility. Remember, low rates are not a given, as seen last week, considering the uncertainty in the financial markets. A cautious approach to float/lock decisions would be wise in this environment.

Copyright 2015. All Rights Reserved. Mortgage Market Information Services, Inc. The information contained herein is believed to be accurate, however no representation or warranties are written or implied.