MIG Market Watch, June 15th, 2020
Posted by : Admin
MARKET COMMENT
Mortgage bond prices finished the week significantly higher which put downward pressure on rates. The Fed’s announced tentative MBS buying amounts remained near unchanged which started the week on a positive note. There was some upward pressure on rates in the middle of the week tied to the data. Consumer prices fell 0.1% vs the expected 0.8% decrease. The core, which excludes volatile food and energy prices, fell 0.1% vs an expected unchanged reading. The Fed left rates unchanged and indicated, “over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace.” Mortgage interest rates finished the week better by 5/8 to 3/4 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Retail Sales | Tuesday, June 16, 8:30 am, et |
Up 7.0% | Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates. |
| Industrial Production | Tuesday, June 16, 9:15 am, et |
Up 2.4% | Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates. |
| Capacity Utilization | Tuesday, June 16, 9:15 am, et |
66.5% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
| Business Inventories | Tuesday, June 16, 10:00 am, et |
Down 0.3% | Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates. |
| NAHB Housing Index | Tuesday, June 16, 10:00 am, et |
44 | Moderately Important. A measure of single family housing. Weakness may lead to lower mortgage rates. |
| Housing Starts | Wednesday, June 17, 8:30 am, et |
1.077M | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Weekly Jobless Claims | Thursday, June 18, 8:30 am, et |
1.4M | Important. An indication of employment. Higher claims may result in lower rates. |
| Philadelphia Fed Survey | Thursday, June 18, 10:00 am, et |
49.7 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
VIRUS FEARS REIGNITE
The financial markets became very volatile last week as coronavirus fears reignited. Mortgage bond prices were positive Thursday morning as stocks struggled. This helped mortgage rates test lows temporarily that morning. The DOW closed 1862 points lower that day but even mortgage bond prices experienced some selling pressure in the last few hours of trading. This was one of the worst days in the stock market since March. Analysts attributed the selloff to concerns virus cases increased after many states reopened businesses.
The future of the economy remains uncertain. The US Treasury Secretary told the Senate Small Banking Committee that more assistance is needed. “We’re open-minded, but we absolutely believe small businesses, and by the way many big businesses in certain industries, are absolutely going to need more help.”
The great news from the Fed was that they will continue to buy mortgage-backed securities in order to keep mortgage rates low and markets functioning. Now is a great time to take advantage of historically low rates.
