MIG Market Watch, September 14th, 2020
Posted by : Admin
MARKET COMMENT
Mortgage bond prices finished the week slightly lower which put a little upward pressure on rates. Rates were generally flat the beginning of the week but saw some sharp upward movement Wednesday afternoon and into Thursday morning. Fortunately, the Fed MBS buying continued and stemmed much of the selling pressure. Producer prices rose 0.3% vs the expected 0.2% increase. The core, which excludes volatile food and energy, rose 0.4% vs 0.2%. Consumer inflation readings echoed the producer report. The consumer price index rose 0.4% vs the expected 0.3% increase. The core rose 0.4% vs 0.2%. Weekly jobless claims were 884K. Analysts expected a reading of 810K. Mortgage interest rates finished the week unchanged to worse by approximately 1/8 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Industrial Production | Tuesday, Sept. 15, 9:15 am, et |
Up 0.8% | Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates. |
| Capacity Utilization | Tuesday, Sept. 15, 9:15 am, et |
71.2% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
| 20-year Treasury Bond Auction | Tuesday, Sept. 15, 1:15 pm, et |
None | Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates. |
| Retail Sales | Wednesday, Sept. 16, 8:30 am, et |
Up 1.1% | Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates. |
| NAHB Housing Index | Wednesday, Sept. 16, 10:00 am, et |
78 | Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates. |
| Fed Meeting Adjourns | Wednesday, Sept. 16, 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, Sept. 17, 8:30 am, et |
1.48M | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Philadelphia Fed Survey | Thursday, Sept. 17, 10:00 am, et |
35 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| U of Michigan Consumer Sentiment | Friday, Sept. 18, 10:00 am, et |
76 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| Leading Economic Indicators | Friday, Sept. 18, 10:00 am, et |
Up 1.2% | Important. An indication of future economic activity. A smaller increase may lead to lower rates. |
INFLATION READINGS
The Federal Reserve prepped the financial markets a few weeks ago with a revision to their inflation guidelines and rates spiked higher surrounding that announcement. Last week the inflation readings on the producer and consumer sides came in higher than expected. Inflation, real or perceived, erodes the value of fixed income securities such as mortgage-backed securities. In the short-term the Fed’s MBS purchases have mortgage interest rates at historical lows. Continued elevated inflation readings could eventually put upward pressure on rates.
