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Market Comment
Mortgage bond prices rebounded last week, which helped mortgage interest rates improve. Weaker than expected data resulted in positive rate movements. Factory orders and the employment report both failed to meet expectations. Factory orders rose 0.8% in contrast to the expected 1.0% increase. Unemployment came in at 9.2%, higher than the expected 9.1% mark. Payrolls increased 18k, considerably weaker than the expected 110k increase. Mortgage bonds ended the week better by about 5/8 of a discount point.
The Treasury will auction 3Y notes on Tuesday, 10Y notes on Wednesday, and 30Y bonds on Thursday. If foreign demand falters rates may come under pressure.
LOOKING AHEAD
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Economic
Indicator
|
Release
Date & Time
|
Consensus
Estimate
|
Analysis
|
| Trade Data |
Tuesday, July 12,
8:30 am, et
|
$43b deficit |
Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| Fed Minutes |
Wednesday, July 13,
2:00 pm, et
|
None
|
Important. Details of the last Fed meeting will be thoroughly analyzed. |
| Weekly Jobless Claims |
Thursday, July 14,
8:30 am, et
|
420k
|
Important. An indication of employment. Higher claims may result in lower rates. |
| Retail Sales |
Thursday, July 14,
8:30 am, et
|
Down 0.1%
|
Important. A measure of consumer demand. Weakness may lead to lower mortgage rates. |
| Producer Price Index |
Thursday, July 14,
8:30 am, et
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Up 0.2%,
Core up 0.2%
|
Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates. |
| Consumer Price Index |
Friday, July 15,
8:30 am, et
|
Up 0.2%,
Core up 0.3%
|
Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates. |
| Industrial Production |
Friday, July 15,
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 |
Friday, July 15,
9:15 am, et
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76.8% |
Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates. |
| U of Michigan Consumer Sentiment |
Friday, July 15,
10:00 am, et
|
71.8 |
Important. An indication of consumers' willingness to spend. Weakness may lead to lower rates. |
Jobs and the Economy
Our economy in the US is driven by consumer spending, which accounts for almost 70% of Gross Domestic Product (GDP). Three driving forces, high unemployment, high commodity costs, and a depressed housing market are currently hampering consumer spending and thus keeping the recession intact.
It is simple; a person without a job can't spend money because they don't have any. High food and energy costs, items that must be purchased to keep a household running, saps money that could be used for other "luxury" items like TV's and cars. Lastly, many households relied on home equity to enhance lifestyles, pay for college, or make major improvements to the house.
The only way for the US to reduce our budget deficits and grow GDP is to get people back to work. We have a long way to go as the employment report showed last week.
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