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Mortgage Market in Review – September 11, 2017

 

Market Comment

Mortgage bond prices finished the week slightly positive which helped rates remain favorable.  Factory orders declined 3.3% as expected.  Stock weakness early in the week set the tone.  Weekly jobless claims printed at 298K and continuing claims, a summation of all receiving benefits, at 1,940K. Expectations were for claims at 239K and continuing claims at 1,945K.  Productivity in Q2/2017 rose 1.5% and unit labor costs increased 0.2%. Economists expected productivity to rise 1.2% and labor costs to rise 0.3%.  The Fed’s Beige Book indicated the economy continued to expand at a moderate rate and noted that “reports were mixed regarding auto production, and contacts in many Districts expressed concerns about a prolonged slowdown in the auto industry.”  We ended the week better by approximately 1/8 to 1/4 of a discount point despite some negative movements Wednesday and Thursday mornings.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Treasury Auctions Begin Monday, Sept. 11,
1:15 pm, et
None Important.  3Y Monday, 10Y Tuesday, 30Y Wednesday. Strong demand may lead to lower mortgage rates.
Producer Price Index Wednesday, Sept. 13,
8:30 am, et
Up 0.2%,
Core up 0.1%
Important.  An indication of inflationary pressures at the producer level.  Weaker figures may lead to lower rates.
Consumer Price Index Thursday, Sept. 14,
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.
Weekly Jobless Claims Thursday, Sept. 14,
8:30 am, et
286K Important.  An indication of employment.   Higher claims may result in lower rates.
Retail Sales Friday, Sept. 15,
8:30 am, et
Up 0.8% Important.  A measure of consumer demand.  A smaller than expected increase may lead to lower mortgage rates.
Industrial Production Friday, Sept. 15,
9:15 am, et
Up 0.3% Important.  A measure of manufacturing sector strength.  A lower than expected increase may lead to lower rates.
Capacity Utilization Friday, Sept. 15,
9:15 am, et
76.8% Important.  A figure above 85% is viewed as inflationary.  Weaker figure may lead to lower rates.
U of Michigan Consumer Sentiment Friday, Sept. 15,
10:00 am, et
96.7 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Consumer Price Index

The Consumer Price Index is widely accepted as the most important measure of inflation.  The CPI is a measure of prices at the consumer level for a fixed basket of goods and services.  The National Statistics Office and the Bureau of Agricultural Statistics of the Department of Agriculture collect price data for the computation of the CPI. Since it is an index number, it compares the level of prices to a base period.  By comparing the level of the index at two different points in time, analysts can determine how much prices have risen in that period.

Unlike other measures of inflation, which only factor domestically produced goods; the CPI takes into account imported goods as well.  This is important due to the ever-increasing reliance of the US economy upon imported goods.  Analysts primarily focus on the core rate of the CPI which factors out the more volatile food and energy prices.  Oil prices are always a concern from an inflation perspective.  Inflation, real or perceived, erodes the value of fixed income securities such as mortgage bonds.


Copyright 2017. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com The information contained herein is believed to be accurate, however no representation or warranties are written or implied.

   MORTGAGE MARKET IN REVIEW Newsletter-September 11th, 2017