MARKET COMMENT
Mortgage bond prices had another volatile week with rates pushing higher the beginning of the week only to bounce back towards the end. Thursday's employment report was mixed. Non-farm payrolls fell 467,000 in June and the unemployment rate stood at 9.5%. Estimates were for jobs to decline 365,000 and the unemployment rate to stand at 9.6%. Fortunately the payrolls figure gained most of the attention along with falling oil prices and we recovered about 1/2 of a discount point Thursday morning. Oil was under $67/barrel Thursday morning, which helped alleviate inflation fears. The bond market was closed Friday for the holiday. For the week interest rates were near unchanged.
The additional debt supplied tied to the US Treasury auctions will be the most important data this week. The trade data may also move the financial markets.
LOOKING AHEAD
| Economic Indicator |
Release Date and Time |
Consensus Estimate |
Analysis |
| 3-year Treasury Note Auction | Tuesday, July 7, 1:30 pm, et |
None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| 10-year Treasury Note Auction | Wednesday, July 8, 1:30 pm, et |
None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Consumer Credit | Wednesday, July 8, 3:00 pm, et |
Down $7.5 billion | Low importance. A significantly large increase may lead to lower mortgage interest rates. |
| 30-year Treasury Bond Auction | Thursday, July 9, 1:30 pm, et |
None | Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates. |
| Trade Data | Friday, July 10, 8:30 am, et |
$30 billion deficit | Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| U of Michigan Consumer Sentiment | Friday, July 10, 10:00 am, et |
71.0 | Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates. |
WEATHER
The mortgage interest rate markets are subject to an enormous number of factors. Most analysts agree that weather can have an effect on market activity. Although the effects are seldom long lasting, they can be quite significant.
The United States is the world's largest exporter of corn. Last year, relatively rainy weather across the Midwest portions of the United States delayed the planting of corn. This caused corn prices to escalate. This year corn farmers planted more acres of corn than analysts expected. Larger corn crops recently caused prices to fall. This is one bright spot amid heightened inflationary fears. Lower corn prices likely will result in lower food prices for some items.
The weather also has the potential to directly alter fuel prices. As we enter the hurricane season, many oil and gas fields in the Gulf along with refineries along coasts are susceptible to damage. If this were to occur, oil prices would almost surely rise sharply. Rising oil prices would do little to help mortgage bond prices already pressured by inflationary fears and competition for investor funds from record debt levels. The result would most likely be higher rates.
The economic effects of various weather occurrences may cause only temporary changes in economic activity. However, those times of change can have a lasting impact on people obtaining mortgages. Despite the rate volatility seen recently, mortgage interest rates remain historically favorable for borrowers. Now is a great time to take advantage of rates at these levels.
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