![Mortgage Investors Group in [Dynamic1]](../assets/images/mortgage-investors-group.svg)
Market Comment
Mortgage bond prices finished the week sharply lower which put significant upward pressure on rates. Tariffs dominated headlines and pressured both stocks and bonds. Flight to safety buying of US Treasuries and MBSs diminished as fear and uncertainty gripped the financial markets. Minneapolis Fed President Kashkari added fuel to the fire by stating we could see bond yields go higher. The data showed tame inflation readings but was overshadowed by the overall negative sentiment. Consumer prices fell 0.1% vs the expected 0.1% increase. The core rose 0.1% vs the expected 0.3% increase. Weekly jobless claims were 223K as expected. Producer prices fell 0.4% vs the expected 0.2% increase. The core fell 0.1% vs the expected 0.3% increase. Consumer sentiment was 50.8 vs 54.5. Mortgage interest rates finished the week worse by approximately 2 full discount points.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
|---|---|---|---|
| Retail Sales | Wednesday, April 16, 8:30 am, et | Up 1.3% | Important. A measure of consumer demand. Weakness may lead to lower mortgage rates. |
| Industrial Production | Wednesday, April 16, 9:15 am, et | Down 0.3% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Capacity Utilization | Wednesday, April 16, 9:15 am, et | 77.9% | Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates. |
| NAHB Housing Index | Wednesday, April 16, 10:00 am, et | 39 | Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates. |
| Weekly Jobless Claims | Thursday, April 17, 8:30 am, et | 225K | Important. An indication of employment. Higher claims may result in lower rates. |
| Housing Starts | Thursday, April 17, 8:30 am, et | Up 3.5% | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Philadelphia Fed Survey | Thursday, April 17, 10:00 am, et | 6.8 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
Housing Starts
Housing starts data is a leading indicator of the state of our economy. This report, provided by the Bureau of the Census, considers data from both single-family homes and multi-family dwellings. Building permits are also released with the housing starts data. By knowing the number of permits issued monthly, analysts can attempt to estimate for the upcoming months. Normally, starts are 10% higher than permits since all locations are not required to have a building permit.
Housing starts and permits give a warning of future economic activity. In effect, a rise in housing starts can lead to a fall in the bond market and vice versa. Consumers tend to hold off on the purchase of new homes, new cars, and other big-ticket items if they are worried about the future of the economy. Housing is an important part of our economy. Declines in housing starts can lead to economic slowdown. On the other hand, increases in housing starts can signal positives for the economy. From the opposite perspective, changes in interest rates often lead to changes in housing starts. Higher interest rates can cause a significant decline in home sales, which can lead to a drop in housing starts. Just the opposite happens when rates remain low. Low mortgage rates affect both home sales and housing starts.
There are great uncertainties that even the Fed struggles to predict. Be cautious in this interest rate environment. Floating is very risky.
