MARKET COMMENT Mortgage bond prices ended the week considerably lower pushing mortgage interest rates higher. Rates were weaker following the extended holiday weekend. Stock strength Wednesday did not help us. The DOW eclipsed the 11k mark and mortgage bonds fell that morning. The inflation data was mixed but the headline PPI figure was higher than expected. Weekly jobless claims came in higher than expected Thursday morning, which helped us erase some of the earlier losses. Unfortunately mortgage bonds were negative overall for the week. Rates finished the week about 5/8 of a discount point higher.
The industrial production and capacity use data Monday will set the tone for trading this week. Fed “Beige Book” data may also move the markets.
- Industrial Production; Oct. 18; Consensus Estimate Up 0.3%; Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates.
- Capacity Utilization; Oct. 18; Consensus Estimate 75.1%; Important. A figure above 85% is viewed as inflationary. A decrease may lead to lower mortgage interest rates.
- Housing Starts; Oct. 19; Consensus Estimate 580k; Important. A measure of housing sector strength. Weakness may lead to lower rates.
- Fed “Beige Book”; Oct. 20; Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates.
- Weekly Jobless Claims; Oct. 21; Consensus Estimate 450k; Important. An indication of employment. Higher claims may result in lower rates.
- Leading Economic Indicators; Oct. 21; Consensus Estimate Up 0.3%; Important. An indication of future economic activity. A smaller increase may lead to lower rates.
Remember that mortgage interest rates remain near historical lows despite last week’s spike in rates. Floating in this environment with hopes that rates will fall lower is a huge gamble as was evident last week. Lower rates are not a guarantee. Taking advantage of rates at these given levels is prudent to avoid future mortgage interest rate volatility.
Source: Courtesy of Todd Kabel, US Bank, Nashville, Tennessee