MARKET COMMENT
Mortgage bond prices rallied Friday pushing mortgage interest rates lower. Bond friendly Core PCE inflation data came in lower than expected. The Fed's most recent estimates call for an increase in this figure by the end of the year. The fact that the data showed lower inflation helped mortgage bonds rally. Consumer confidence came in at a weaker than expected 46.6 mark. Analysts were looking for a reading of 48.7. The Treasury auctions were mixed. The 2 and 5 year note auctions received poor foreign demand while the 7-year auction showed strong foreign demand. For the week interest rates fell by about 3/4 of a discount point.
The employment report will be the most important release this week. With so many data releases expect the market to be very volatile.
LOOKING AHEAD
| Economic Indicator |
Release Date and Time |
Consensus Estimate |
Analysis |
| Construction Spending | Monday, Aug. 3, 10:00 am, et |
Down 0.6% | Low importance. An indication of economic strength. A significant decrease may lead to lower rates. |
| ISM Index | Monday, Aug. 3, 10:00 am, et |
46.5 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Personal Income and Outlays | Tuesday, Aug. 4, 8:30 am, et |
Down 1.0%, Up 0.3% | Important. A measure of consumers' ability to spend. Weakness may lead to lower mortgage rates. |
| ADP Employment | Wednesday, Aug. 5, 8:30 am, et |
Down 340k | Important. An indication of employment. A larger decrease in payrolls may bring lower rates. |
| Factory Orders | Wednesday, Aug. 5, 10:00 am, et |
Up 0.5% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Employment | Friday, Aug. 7, 8:30 am, et |
9.6%, Down 333k | Very important. An increase in unemployment or a large decrease in payrolls may bring lower rates. |
| Consumer Credit | Friday, Aug. 7, 2:00 pm, et |
Down $4.1 billion | Low importance. A significantly larger than expected increase may lead to lower mortgage interest rates. |
PERSONAL INCOME & OUTLAYS
The personal income and outlays release is a monthly report issued by the Bureau of Economic Analysis (BEA). The data is important because it is thought to provide a solid indication of future consumer demand. The personal income component is primarily a measure of wages and salaries. The outlays component is primarily a measure of spending on goods and services. Together the figures provide analysts valuable insight into consumer economic standing and consumption.
The prior release showed wages and salaries decreased $12.4 billion. Future decreases may adversely affect consumer spending and the entire US economy. Decreased wages coupled with tighter borrowing restrictions make it difficult for consumers to spend money.
It is important to note that no single economic indicator can consistently predict the future of the economy. However, the personal income and outlays report is a closely watched release. The consumer remains a vital component of the US economy.
Now is a good time to take advantage of mortgage interest rates at their current levels to avoid exposure to future market volatility.
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