Market Comment
Mortgage bond prices finished the week mixed with government loans worse and conventional loans near unchanged. The data was mixed. The trade deficit was $67.1B which was about as expected. Productivity fell 5.2% vs the expected 4.8% decline. Weekly jobless claims were 184K vs 223K. Higher consumer inflation readings resulted in some market volatility, but Fed MBS purchases tempered selling pressure. Consumer prices rose 0.8% vs 0.6% for the month. This was 6.8% on a year-by-year basis and the highest increase in decades. The core, which excludes volatile food and energy prices, rose 0.5% as expected. Consumer sentiment was 70.4 vs 66. Mortgage interest rates on government loans finished the week worse by approximately 1/8 to 1/4 of a discount point while rates on conventional loans finished relatively flat.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Producer Price Index | Tuesday, Dec. 14, 8:30 am, et |
Up 0.6%, Core up 0.5% |
Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates. |
| Retail Sales | Wednesday, Dec. 15, 8:30 am, et |
Up 1.4% | Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates. |
| NAHB Housing Index | Wednesday, Dec. 15, 10:00 am, et |
83 | Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates. |
| Fed Meeting Adjourns | Wednesday, Dec. 15, 2:15 pm, et |
No rate changes | Important. Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting. |
| Housing Starts | Thursday, Dec. 16, 8:30 am, et |
1.57M | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Philadelphia Fed Survey | Thursday, Dec. 16, 8:30 am, et |
28.5 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Industrial Production | Thursday, Dec. 16, 9:15 am, et |
Up 0.7% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Capacity Utilization | Thursday, Dec. 16, 9:15 am, et |
75.8% | Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates. |
Industrial Production
The Federal Reserve releases the Industrial Production report each month. It is a real measure of output from manufacturing, mining, electric, and gas utilities. The data is significant in that it provides an indicator of the state of the economy. Analysts use the data to attempt to determine market direction. The Fed uses the data to help set the course for monetary policy. Generally, the Fed likes to see steady growth in the economy with little price pressures. They signaled to the market for some time that they are data dependent and will continue to keep rates low to spur economic growth amid the pandemic.
Mortgage interest rates usually react favorably to weaker than expected industrial production data.In times of economic weakness investors often move out of stocks and into mortgage bonds. When things look good investors often move out of bonds and back into stocks.
Now is a great time to take advantage of mortgage interest rates at these historically favorable levels.
