Chico Market Update
MARKET COMMENT
Mortgage bond prices were near unchanged holding rates unchanged overall for the week. We started in positive territory as rates held low following the extended holiday weekend. Unfortunately some considerable stock strength pressured mortgage bonds lower and rates higher mid week. There wasn’t much data but the weekly jobless claims did come in better than expected which didn’t help rates. Rates initially fell by about 1/8 of a discount point the beginning of the week only to have those improvements erased Wednesday afternoon and Thursday morning.
The most important data will be the inflation releases the latter portion of the week. The Treasury will have another round of record auctions with a 3-year auction Monday, 10-year auction Tuesday, and a 30-year auction Wednesday. Foreign appetite for US debt will continue to play a key role in the ability of interest rates to remain low.
LOOKING AHEAD
| Economic Indicator |
Release Date and Time |
Consensus Estimate |
Analysis |
| Trade Data | Tuesday, July 13, 8:30 am, et |
-40.3B | Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| Retail Sales | Wednesday, July 14, 8:30 am, et |
Down 0.3% | Important. A measure of consumer demand. Weakness may lead to lower mortgage rates. |
| Business Inventories | Wednesday, July 14, 10:00 am, et |
Down 0.2% | Low importance. An indication of stored-up capacity. A significantly large increase may lead to lower rates. |
| Fed Minutes | Wednesday, July 14, 2:00 pm, et |
None | Important. Details of the last Fed meeting will be thoroughly analyzed. |
| Producer Price Index | Thursday, July 15, 8:30 am, et |
Up 0.1% Core up 0.1% |
Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates. |
| Industrial Production | Thursday, July 15, 9:15 am, et |
Up 0.2% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Capacity Utilization | Thursday, July 15, 9:15 am, et |
74.2 | Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates. |
| Philadelphia Fed Survey | Thursday, July 15, 10:00 am, et |
8.6 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Consumer Price Index | Friday, July 16, 8:30 am, et |
Up 0.1% Core unchanged |
Important. A measure of inflation at the consumer level. Lower figures may lead to lower rates. |
RETAIL SALES
Retail sales data is the first indication of weakness or strength in consumer spending released each month. The Bureau of the Census of the US Department of Commerce provides information on how much the consumer spends on the purchase of goods. This data provides the consumption part of the gross domestic product. Retail sales data represents merchandise sold for cash or credit by retailers. Durable goods, such as autos, make up 35% of the figure. The balance consists of non-durables such as gasoline, restaurants, and general merchandise.
There are several drawbacks to the report. The data covers purchases of goods only, not services. It is also not adjusted for inflation and is extremely volatile. Economists are concerned that the current economic uncertainty will continue to curtail consumer-spending habits. Consumers have generally been given credit for sustaining the economy even amid the economic turmoil.
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