MIG Market Watch, June 14th 2021
Posted by : Admin
Market Comment
Mortgage bond prices finished the week near unchanged which held rates relatively steady. Rates were up and down throughout the week but within a narrow range. We started the week on a negative note Monday morning with a slight increase in rates but by Tuesday we were back to flat. The Fed continued their multi-billion-dollar daily MBS purchases which helped counter the selling pressure. The data was mixed. The trade deficit was $68.9B vs the expected $68.2B. The consumer price index rose 0.6% vs the expected 0.4% increase. The core, which excludes volatile food and energy prices, rose 0.7% vs the expected 0.4% increase. Weekly jobless claims were 376K vs 370K. Consumer sentiment data was 86.4 vs 84. Mortgage interest rates finished the week unchanged to better by approximately 1/8 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Producer Price Index | Tuesday, June 15, 8:30 am, et |
Up 0.5%, Core up 0.5% |
Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates. |
| Retail Sales | Tuesday, June 15, 8:30 am, et |
Down 0.4% | Important. A measure of consumer demand. Weakness may lead to lower mortgage rates. |
| Industrial Production | Tuesday, June 15, 9:15am, et |
Up 0.7% | Important. A measure of manufacturing sector strength. A lower-than-expected increase may lead to lower rates. |
| Capacity Utilization | Tuesday, June 15, 9:15am, et |
75.2% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
| NAHB Housing Index | Tuesday, June 15, 10am, et |
83 | Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates. |
| Housing Starts | Wednesday, June 16, 8:30 am, et |
1.63M | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Fed Meeting Adjourns | Wednesday, June 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. |
| Philadelphia Fed Survey | Thursday, June 17, 10:00 am, et |
42 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Leading Economic Indicators | Thursday, June 17, 10:00 am, et |
Up 1.2% | Important. An indication of future economic activity. A smaller increase may lead to lower rates. |
Play It Safe
Inflation, real or perceived, erodes the value of fixed income investments such as mortgage-backed securities (MBSs.) These are the debt instruments that dictate mortgage interest rates. We saw a spike in consumer prices last week and producer inflation readings are headed our way this week. Continued signs of inflation could cause mortgage interest rates to rise.
Mortgage interest rates remain historically favorable despite growing inflation concerns because the Federal Reserve continues to purchase billions of dollars of MBSs daily. Some Fed members recently indicated that “it might be appropriate at some point” to reduce asset purchases. The timing of this is uncertain, even to Fed members. A cautious approach to lock decisions is wise in this environment.
