MARKET COMMENT
Mortgage bond prices finished the week higher which helped rates fall. Most of the improvements came early in the week. PCE Core inflation, the Fed’s preferred inflation gauge, rose 0.1% as expected. The ADP employment report was weaker than expected. However, the June number was revised sharply higher. Stocks hit record highs. Unemployment was 4.3% as expected. However, non-farm payrolls rose 209K versus an expected reading of 200K. In addition, June’s figure was revised to 231K from 222K which erased some of the improvements from earlier in the week. Average hourly earnings rose 0.3% as expected. The trade deficit was $43.6B. Market participants looked for a reading of $44B. We ended the week with discount points better by 1/8 to 1/4 despite rate increases Friday morning.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Consumer Credit | Monday, Aug. 7, 3:00 pm, et | $18B | Low importance. A significantly large increase may lead to lower mortgage interest rates. |
| 3-year Treasury Note Auction | Tuesday, Aug. 8, 1:15 pm, et | None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Preliminary Q2 Productivity | Wednesday, Aug. 9, 8:30 am, et | Up 0.1% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| 10-year Treasury Note Auction | Wednesday, Aug. 9, 1:15 pm, et | None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Producer Price Index | Thursday, Aug. 10, 8:30 am, et | Up 0.1%, Core up 0.1% | Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates. |
| Weekly Jobless Claims | Thursday, Aug. 10, 8:30 am, et | 242K | Important. An indication of employment. Higher claims may result in lower rates. |
| 30-year Treasury Bond Auction | Thursday, Aug. 10, 1:15 pm, et | None | Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates. |
| Consumer Price Index | Friday, Aug. 11, 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. |
PRODUCTIVITY
Productivity is the rate at which goods or services are produced. It is most commonly defined in terms of labor, which is the contribution of people to the process. Labor costs represent about two thirds of the value of the output produced. The Bureau of Labor Statistics of the US Department of Labor releases the most widely cited productivity statistics quarterly and annually. Increased productivity is often credited for economic growth with little signs of inflation.
Productivity is significant in that as it increases, businesses can produce more with the same or less input. This wealth building effect is vital to the US economy. As productivity increases, the US economy generally performs better. As productivity decreases, the economy generally suffers. While the bond market generally favors signs of weakness in the economy, bonds tolerate growth as long as the economic environment shows little or no inflationary pressures. Keep in mind that rates remain very favorable. Now is a great time to avoid the uncertainty surrounding continued market volatility.
