![Mortgage Investors Group in [Dynamic1]](../assets/images/mortgage-investors-group.svg)
Market Comment
Mortgage bond prices finished the week a little lower which put upward pressure on rates. The up and down trading pattern continued. We started the week with significant rate increases and finished the week with some slight positive rebounds. Oil prices shot higher recently as Russia and Saudi Arabia announced production cuts. The Fed Beige Book indicated many consumers have exhausted savings and increased debt. In addition, the Fed stated “many businesses struggled to pass along cost pressures.” The economic data was mixed. Factory orders fell 2.1% vs 2.5%. The trade deficit was $65B vs $68B. Weekly jobless claims were 216K vs 233K. Productivity was 3.5% vs 3.7%. Mortgage interest rates finished the week worse by approximately 1/8 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Consumer Price Index | Wednesday, Sept. 13, 8:30 am, et |
Up 0.5%, Core up 0.2% |
Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates. |
| Weekly Jobless Claims | Thursday, Sept. 14, 8:30 am, et |
230K | Important. An indication of employment. Higher claims may result in lower rates. |
| Producer Price Index | Thursday, Sept. 14, 8:30 am, et |
Up 0.4%, Core up 0.2% |
Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates. |
| Retail Sales | Thursday, Sept. 14, 8:30 am, et |
Up 0.2% | Important. A measure of consumer demand. Weakness may lead to lower mortgage rates. |
| Business Inventories | Thursday, Sept. 14, 10:00 am, et |
Up 0.1% | Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates. |
| Industrial Production | Friday, Sept. 15, 9:15 am, et |
Up 0.1% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Capacity Utilization | Friday, Sept. 15, 9:15 am, et |
79.3% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
| U of Michigan Consumer Sentiment | Friday, Sept. 15, 10:00 am, et |
69.5 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Producer Price Index
The producer price index is a measure of prices at the producer level and is important because it is the first inflation report to be released each month. Investors are typically able to gain an initial indication of inflationary pressures from the release. If producer prices are increasing, there is a tendency for producers to pass the increases on to consumers in the form of higher priced goods.
It is important to note that the PPI is only a measure of goods, while the consumer price index is a measure of goods and services. It is possible for the price of goods to remain stable, while the price of services increases. In this scenario PPI would do little to warn of a change in inflationary pressures, while the CPI report would provide an indication of the inflationary effects of the service component.
Inflation remains a dominant fear in the MBS market. Inflation readings are likely to cause mortgage interest rate volatility.
