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Market Comment for Week of November 1, 2010…

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MARKET COMMENT   Mortgage bond prices ended the week lower pushing mortgage interest rates considerably higher. A sell off early in the week sent rates skyrocketing higher. Stronger than expected consumer confidence data Tuesday and durable goods orders data Wednesday piled on an already weakened bond market. The debt auctions generally went well but were not enough to bounce us back from the drop-off. Unfortunately mortgage bonds were negative overall for the week finishing generally about 3/8’s of a discount point higher. 

The Fed meeting this week will be the most important release. While no rate change is expected the wording of the statement will be carefully scrutinized. 


  • Personal Income and Outlays; Nov. 1; Consensus Estimate Up 0.3%, Up 0.4%; Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
  • PCE Core Inflation; Nov. 1; Consensus Estimate Up 0.1%; Important. A measure of price increases for all domestic personal consumption. Weakness may help rates.
  • ISM Index; Nov. 1; Consensus Estimate 53.6; Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
  • ADP Employment; Nov. 3; Consensus Estimate 25k; Important. An indication of employment. Weakness may bring lower rates.
  • Factory Orders; Nov. 3; Consensus Estimate Up 0.6%; Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
  • Fed Meeting Adjourns; Nov. 3; Consensus Estimate No rate change; Important. Few expect the Fed to raise rates, but some volatility may surround the adjournment of this meeting.
  • Preliminary Q3 Productivity; Nov. 4; Consensus Estimate Up 0.6%; Important. A measure of output per hour. Improvement may lead to lower mortgage rates.
  • Employment; Nov. 5; Consensus Estimate 9.6%, Payrolls +45k; Very important. An increase in unemployment or weakness in payrolls may bring lower rates.

WHY DATA IS IMPORTANT   One of the easiest and most important things to do when making a decision whether to float or lock a loan is knowing what data is going to be released. Economic releases are important because they provide a snapshot of a portion of the economy. Data is even more important in that it is often the cause of market volatility. Upcoming data events are readily available and there is no excuse not knowing what data will be released in the week ahead. 

While an in depth understanding of an economic event can help a person make informed decisions, it is more important to have a rudimentary understanding of when an important piece of data will be released and what basic effect that data can have on the market. Understanding the nuances of a release does very little for a person if they are blindsided by not knowing when the release will occur. Accurately predicting how each and every release will come in is impossible. 

Floating into important economic data can be very risky and can expose a person to huge market swings. Keep that in mind this week, as there is an abundance of significant data heading our way. The combo of a Fed meeting and the employment report in the same week is not common. 

Source: Courtesy of Todd Kabel, US Bank, Nashville, Tennessee


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