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Mortgage Market in Review – September 7, 2015

Market Comment

Mortgage bond prices finished the week lower which pushed rates higher. Stock volatility dominated headlines. The DOW fell 115 points Monday, 490 points Tuesday and rose 293 points Wednesday. The data was mixed. ADP employment rose 190K versus the expected 202K increase. This was rate friendly. Revised Q2 Productivity rose 3.3% from up 2.8% the prior release. Factory orders rose 0.4% versus the expected 0.9% increase. Weekly jobless claims were 282K versus the expected 273K. Unemployment was 5.1% and payrolls rose 173K. Mortgage interest rates finished the week worse by about 1/8 to 1/4 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
3-year Treasury Note Auction Tuesday, Sept. 8,
1:15 pm, et
None Important.  $24B of Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
10-year Treasury Note Auction Wednesday, Sept. 9,
1:15 pm, et
None Important.  $21B of Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims Thursday, Sept. 10,
8:30 am, et
278K Important.  An indication of employment.   Higher claims may result in lower rates.
30-year Treasury Bond Auction Thursday, Sept. 10,
1:15 pm, et
None Important.  $13B of Bonds will be auctioned.  Strong demand may lead to lower mortgage rates.
Producer Price Index Friday, Sept. 11,
8:30 am, et
Up 0.2%,
Core up 0.2%
Important.  An indication of inflationary pressures at the producer level.  Weaker figures may lead to lower rates.
U of Michigan Consumer Sentiment Friday, Sept. 11,
10:00 am, et
92.5 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Consumer Sentiment

In the US the consumer is often seen as the driving force of the economy. A large percentage of the total economic output is for personal use. Analysts attempt to predict the future spending patterns of consumers to gauge economic activity.

The Michigan consumer sentiment index is one piece of data used to measure consumer attitudes. The index is derived from a telephone survey, which gathers information on consumer expectations of the overall economy. The preliminary report is released around the 10th of each month and then is revised throughout the remainder of the month. It is significant in that it provides a precursor into consumers’ willingness to spend in the months ahead. However, many analysts point out that willingness to spend does not always convert to actual expenditures.

American consumers continue to spend despite economic uncertainty, liquidity issues, housing market fluctuations, and stock volatility. However, many analysts question whether consumers can continue to buoy the economy. Look for any variation from estimates to cause mortgage interest rate volatility. Signs of eroding consumer confidence could lead to improvements in mortgage interest rates. However, stronger than expected figures could spike rates.


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