MARKET COMMENT
Mortgage bond prices finished the week lower which put upward pressure on rates. Rates were higher the beginning of the week as news out of the Eurozone was positive and reversed some of the flight to safety buying of U.S. debt instruments. The data was mixed. The Fed minutes showed 3 members wanted a rate hike at the last meeting. Weekly jobless claims were 246K versus the expected 254K. Continuing claims were 2046K versus the prior 2062K. Retail sales rose 0.6% as expected. However, inflation readings were higher than expected. The producer price index rose 0.3%. Analysts looked for a 0.2% increase. The core, which excludes volatile food and energy, rose 0.2% versus the expected 0.1% increase. Consumer sentiment was 87.9 versus the expected 92.4. Mortgage interest rates finished the week worse by approximately 1/8 to 1/4 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Industrial Production | Monday, Oct. 17, 9:15 am, et | Down 0.4% | Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates. |
| Capacity Utilization | Monday, Oct. 17, 9:15 am, et | 75.3% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
| Consumer Price Index | Tuesday, Oct. 18, 8:30 am, et | Up 0.2%, Core up 0.2% | Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates. |
| NAHB Housing Index | Tuesday, Oct. 18, 10:00 am, et | 65 | Moderately Important. A measure of single family housing. Weakness may lead to lower mortgage rates. |
| Housing Starts | Wednesday, Oct. 19, 8:30 am, et | 1140K | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Fed “Beige Book” | Wednesday, Oct. 19, 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. 20, 8:30 am, et | 245K | Important. An indication of employment. Higher claims may result in lower rates. |
| Philadelphia Fed Survey | Thursday, Oct. 20, 10:00 am, et | 10.5 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
FED “BEIGE BOOK”
The Fed “Beige Book” is a summary of economic conditions from each of the 12 Federal Reserve regional districts. The release takes place eight times a year approximately two weeks ahead of each of the Federal Open Market Committee meetings. The report is used at the FOMC meetings, which tends to be one of the most influential events in the market.
Market participants are continually attempting to determine what FOMC interest rate policy will be ahead of the next meeting. Any deviation from expectations usually results in extreme short-term market volatility. The timing of the “Beige Book” provides analysts a valuable look at one of the many factors the FOMC considers in setting interest rate policy. The Fed’s ability to keep rates lower may be somewhat restricted if the “Beige Book” shows signs of economic growth and inflationary pressures. However, if the report shows signs of difficulties, the Fed may keep rates low to stimulate the economy. Be cautious heading into this release.
