Market Comment
Mortgage bond prices finished the week sharply higher which put downward pressure on rates. We started the week on a positive note and extended those improvements Friday morning. The data generally showed weaker than expected economic activity headlined by the poor employment report. ISM Index was 60.7% vs the expected 65%. Construction spending rose 0.2% vs the expected 1.9% increase. The trade deficit was $74.4B vs $74.9B. ADP employment rose 742K vs the expected 800K increase. Factory orders rose 1.1% vs the expected 0.8% increase. Weekly jobless claims were 498K vs the expected 535K. Productivity was 5.4% vs the expected 4.8%. There was inflation talk mid-week from Warren Buffett and Janet Yellen which caused some rate jitters, but the market held most of the gains despite the volatility. Mortgage interest rates finished the week better by approximately 1/2 to 5/8 of a discount point.
Looking Ahead
| Economic Indicator |
Release Date & Time | Consensus Estimate | Analysis |
| 3-year Treasury Note Auction | Tuesday, May 11, 1:15 pm, et |
None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Consumer Price Index | Wednesday, May 12, 8:30 am, et |
Up 0.3%, Core up 0.2% |
Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates. |
| 10-year Treasury Note Auction | Wednesday, May 12, 1:15 pm, et |
None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Producer Price Index | Thursday, May 13, 8:30 am, et |
Up 0.3%, Core up 0.4% |
Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates. |
| Weekly Jobless Claims | Thursday, May 13, 8:30 am, et |
575K | Important. An indication of employment. Higher claims may result in lower rates. |
| Retail Sales | Friday, May 14, 8:30 am, et |
Up 1.1% | Important. A measure of consumer demand. Weakness may lead to lower mortgage rates. |
| Industrial Production | Friday, May 14, 9:15 am, et |
Up 1.1% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Capacity Utilization | Friday, May 14, 9:15 am, et |
75.3% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
| U of Michigan Consumer Sentiment | Friday, May 14, 10:00 am, et |
91.0 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Employment
The U.S. Bureau of Labor Statistics reported Friday that “Both the unemployment rate, at 6.1 percent, and the number of unemployed persons, at 9.8 million, were little changed in April. These measures are down considerably from their recent highs in April 2020 but remain well above their levels prior to the coronavirus (COVID-19) pandemic (3.5 percent and 5.7 million, respectively, in February 2020).
Total nonfarm payroll employment increased by 266,000 in April, following increases of 770,000 in March and 536,000 in February. In April, nonfarm employment is down by 8.2 million, or 5.4 percent, from its pre-pandemic level in February 2020.”
