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Mortgage Market in Review – September 15, 2014

Market Comment Mortgage bond prices finished the week lower, which pushed rate sharply higher.  Prices drifted lower throughout the majority of the week amid no data.  The bond market as a whole saw prices ascend throughout the year.  The fear of a Fed rate adjustment in the near term had traders playing defense.  Nobody wants to be on the wrong side of the trade if the Fed hikes rates sooner rather than later.  Higher than expected weekly jobless claims Thursday morning helped stem some of the losses but the release wasn’t enough to turn things for the week.  Retail sales rose 0.6% in August, stronger than the expected 0.3% increase economists predicted. Retail sales data gives an indication of the health of the consumer, which in the US accounts for 2/3’s of GDP.  Mortgage interest rates finished higher by 5/8 of a discount point for the trading week.

LOOKING AHEAD

Economic Indicator Release Date & Time Consensus Estimate Analysis
Industrial Production Monday, 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 Monday, Sept. 15, 9:15 am, et 79.3% Important.  A figure above 85% is viewed as inflationary.  Weaker figure may lead to lower rates.
Producer Price Index Tuesday, Sept. 16, 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.
Consumer Price Index Wednesday, Sept. 17, 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.
Fed Meeting Adjourns Wednesday, Sept. 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, Sept. 18, 8:30 am, et 321k Important.  An indication of employment.   Higher claims may result in lower rates.
Housing Starts Thursday, Sept. 18, 8:30 am, et 1123k Important.  A measure of housing sector strength.  Weakness may lead to lower rates.
Philadelphia Fed Survey Thursday, Sept. 18, 10:00 am, et 9.8 Moderately important.  A survey of business conditions in the Northeast.  Weakness may lead to lower rates.
Leading Economic Indicators Friday, Sept. 19, 10:00 am, et Up 0.5% Important.  An indication of future economic activity.  A smaller increase may lead to lower rates.

Fed Turning Point

The lull in volatility we saw this summer will come to an abrupt end and will most likely be tied to an event like a Fed meeting or jobs report.

In 2008 as the world was quaking, the Federal Reserve came to the rescue of the global banking and financial system.  Through a series of rate cuts and bond buying sprees, the governing body kept the financial system from imploding.  Six years later most of the metrics the Fed is worried about have healed and it is time to move to the next chapter.

It is a foregone conclusion at this point that Janet Yellen and the Fed will cease QE III by Halloween.  Global traders will stay awake this fall and winter guessing when the Fed will make its first move to tighten interest rates.

Floating borrowers and referral sources need to understand how important the Fed meeting’s are in terms of potential volatility.

Copyright 2014. 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.