MARKET COMMENT Mortgage bond prices rose last week pushing mortgage interest rates slightly lower. We started the week positive while stocks struggled. Housing starts, industrial production, and capacity use data all were weaker than expected which helped rates improve Tuesday. Lower than expected weekly jobless claims caused rates to initially spike higher Thursday morning. Fortunately the leading economics indicators data and decent 10Y TIPS auction helped stem that weakness. Mortgage bonds ended the week better by about 1/8 to 1/4 of a discount point.
The PCE core inflation data will be one of the more significant releases this week. Any indication of inflation would not bode well for lower rates.
• New Home Sales; May 24; Consensus Estimate 288k; Important. An indication of economic strength and credit demand. A decrease may lead to lower rates.
• 2-year Treasury Note Auction; May 24; Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
• Durable Goods Orders; May 25; Consensus Estimate Up 3.2%; Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.
• 5-year Treasury Note Auction; May 25; Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
• Q1 Revised GDP; May 26; Consensus Estimate Up 1.8%; Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
• Weekly Jobless Claims; May 26; Consensus Estimate 415k; Important. An indication of employment. Higher claims may result in lower rates.
• 7-year Treasury Note Auction; May 26; Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
• Personal Income and Outlays; May 27; 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; May 27; Consensus Estimate Up 0.1%; Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.
• U of Michigan Consumer Sentiment; May 27; Consensus Estimate 72; Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
PCE The US Department of Commerce’s Bureau of Economic Analysis releases the core PCE price index. The report provides the average increase in costs for personal consumption expenditures excluding food and energy. As of July 2009 the figure now includes food services in the figure.
The report is significant in that the Fed uses the PCE in determining inflation as opposed to the prior use of the consumer price index. The reports vary in that the CPI in that the PCE includes the price of spending for and on behalf of households. This includes health care spending paid for a household by a business. The CPI only reflects out of pocket expenses paid directly by consumers.
Source: Todd Kabel, F&M Mortgage; Blog distribution provided by Kenneth Bargers and Bargers Solutions, a proud member of Pilkerton Realtors, residential real estate services located in Nashville, Tennessee