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Market Comment
Mortgage bond prices finished the week slightly higher helping rates improve.The up and down trading pattern continued throughout the week.Rates were better Monday morning tied to stock weakness.Those gains were erased after Spain and Italy had another round of relatively successful debt auctions Tuesday.Fortunately MBS prices bounced back Thursday following reports out of Europe that consumer confidence there continued to slip.This reignited some of the flight to quality buying of US debt instruments.The Treasury auctions generally showed strong foreign demand.Mortgage interest rates finished the week better by about 1/8 of a discount point.
LOOKING AHEAD
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Economic
Indicator
|
Release
Date & Time
|
Consensus
Estimate
|
Analysis
|
| Personal Income and Outlays |
Monday, April 30,
8:30 am, et
|
Up 0.1%,
Up 0.6%
|
Important.A measure of consumers’ ability to spend.Weakness may lead to lower mortgage rates. |
| PCE Core Inflation |
Monday, April 30,
8:30 am, et
|
Up 0.2% |
Important.A measure of price increases for all domestic personal consumption.Weaker figure may help rates improve. |
| ISM Index |
Tuesday, May 1,
10:00 am, et |
53 |
Important.A measure of manufacturer sentiment.Weakness may lead to lower mortgage rates. |
| Construction Spending |
Tuesday, May 1,
10:00 am, et |
Up 0.1% |
Low importance.An indication of economic strength.Significant weakness may lead to lower rates. |
| ADP Employment |
Wednesday, May 2,
8:30 am, et
|
197k |
Important.An indication of employment.Weakness may bring lower rates. |
| Factory Orders |
Wednesday, May 2,
10:00 am, et
|
Up 0.8% |
Important.A measure of manufacturing sector strength.Weakness may lead to lower rates. |
| Weekly Jobless Claims |
Thursday, May 3,
8:30 am, et
|
390k |
Important.An indication of employment.Higher claims may result in lower rates. |
| Preliminary Q1 Productivity |
Thursday, May 3,
8:30 am, et
|
Up 0.3% |
Important.A measure of output per hour.Improvement may lead to lower mortgage rates. |
| Employment |
Friday, May 4,
8:30 am, et
|
8.3%,
Payrolls +110k
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Very important.An increase in unemployment or weakness in payrolls may bring lower 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.
The Fed noted last week that inflation in the short term has escalated.However, they also indicated that long term inflation projections show tame expectations.
Mortgage interest rates will likely spike higher in the short term if the PCE core reading is higher than expected.A reading in line with expectations will likely help rates stay in check.
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