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Market Comment
Mortgage bond prices finished the week lower, which made rates worse.Rates rose the first half of the week on profit taking following the MBS rally the prior week.The Treasury auctions generally disappointed with weak foreign demand.Weekly jobless claims came in @ 346k versus the expected 365k mark. This was a reversal of the rate friendly ADP and employment reports released at the beginning of the month.Retail sales fell 0.4% in March, sharply lower than economists’ expectations.That data helped rates recover somewhat on Friday.
Mortgage rates finished the week about 1/4 of a discount point higher.
LOOKING AHEAD
|
Economic
Indicator
|
Release
Date & Time
|
Consensus
Estimate
|
Analysis
|
| Consumer Price Index |
Tuesday, April 16,
8:30 am, et
|
Up 0.3%,
Core up 0.1%
|
Important.A measure of inflation at the consumer level.Weaker figures may lead to lower rates. |
| Housing Starts |
Tuesday, April 16,
8:30 am, et
|
857k |
Important.A measure of housing sector strength.Weakness may lead to lower rates. |
| Industrial Production |
Tuesday, April 16,
9:15 am, et
|
Up 0.2% |
Important.A measure of manufacturing sector strength.A lower than expected increase may lead to lower rates. |
| Capacity Utilization |
Tuesday, April 16,
9:15 am, et
|
78.9% |
Important.A figure above 85% is viewed as inflationary.Weaker figure may lead to lower rates. |
| Fed “Beige Book” |
Wednesday, April 17,
2:00 pm, et
|
None |
Important.This Fed report details current economic conditions across the US.Signs of weakness may lead to lower rates. |
| Weekly Jobless Claims |
Thursday, April 18,
8:30 am, et
|
347k |
Important.An indication of employment.Higher claims may result in lower rates. |
| Philadelphia Fed Survey |
Thursday, April 18,
10:00 am, et
|
1.8 |
Moderately important.A survey of business conditions in the Northeast.Weakness may lead to lower rates. |
| Leading Economic Indicators |
Thursday, April 18,
10:00 am, et
|
Up 0.2% |
Important.An indication of future economic activity.A smaller increase may lead to lower rates. |
| 5Y TIPS Auction |
Thursday, April 18,
1:15 pm, et
|
None |
Important.Notes will be auctioned.Strong demand may lead to lower mortgage rates. |
Consumer Price Index
The Consumer Price Index is widely accepted as the most important measure of inflation.The CPI is a measure of prices at the consumer level for a fixed basket of goods and services.The National Statistics Office and the Bureau of Agricultural Statistics of the Department of Agriculture collect price data for the computation of the CPI. Since it is an index number, it compares the level of prices to a base period.By comparing the level of the index at two different points in time, analysts can determine how much prices have risen in that period.Unlike other measures of inflation, which only factor domestically produced goods; the CPI takes into account imported goods as well.This is important due to the ever-increasing reliance of the US economy upon imported goods.Analysts primarily focus on the core rate of the CPI which factors out the more volatile food and energy prices.Oil prices are a concern from an inflation perspective.Record debt levels continue to weigh heavily upon the financial markets as well.Inflation, real or perceived, erodes the value of fixed income securities such as mortgage bonds.Rates have a better chance of falling with lower than expected CPI figures.
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