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Mortgage Market in Review – September 8, 2014

Market Comment

Mortgage bond prices finished the week near unchanged which kept rates in check. Stronger than expected ISM Index data Tuesday morning caused rates to spike a little higher. Weaker than expected ADP employment data helped recover those earlier losses. ADP employment came in at 204k versus the expected 220k mark. Weekly jobless claims were near expectations at 302k versus the predicted 300k. The trade deficit was $40.5b versus the expected $42b. There was a small spike in rates late in the week tied to the European Central Bank rate cut. The heavyweight employment report helped balance things Friday morning. Unemployment came in at 6.1% as expected. Non-farm payrolls rose 142k versus the expected 225k increase. Mortgage interest rates finished flat for the trading week.

LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Consumer Credit Monday, Sept. 8,
3:00 pm, et
$9.87b Low importance. A significantly large increase may lead to lower mortgage interest rates.
3-year Treasury Note Auction Tuesday, Sept. 9,
1:15 pm, et
None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
10-year Treasury Note Auction Wednesday, Sept. 10,
1:15 pm, et
None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims Thursday, Sept. 11,
8:30 am, et
307k Important. An indication of employment. Higher claims may result in lower rates.
30-year Treasury Bond Auction Thursday, Sept. 11,
1:15 pm, et
None Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
Retail Sales Friday, Sept. 12,
8:30 am, et
Up 0.8% Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates.
U of Michigan Consumer Sentiment Friday, Sept. 12,
10:00 am, et
82.5 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
Business Inventories Friday, Sept. 12,
10:00 am, et
Up 0.3% Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower 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.

Despite economic uncertainty, liquidity issues, housing market fluctuations, and high energy costs, American consumers continue to spend. 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 higher.

 


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