Market Comment
Mortgage bond prices finished the week sharply lower which put upward pressure on rates. We started on a positive note Monday and Tuesday but selling pressure emerged mid-week and into the end. Fed Vice Chair Richard Clarida said he expects the Fed to raise rates in 2023 but also noted, “I believe that the risks to my outlook for inflation are to the upside.” This sparked selling that continued throughout the remainder of the week. ISM Index was 59.5% vs 61.2%. Factory orders rose 1.5% vs 1%. ADP employment rose 330K vs 700K, but we didn’t get much traction on the weaker than expected number. The employment report was stronger than expected. Unemployment came in at 5.4% vs 5.7%. Payrolls rose 945K vs 900K. Mortgage interest rates finished the week worse by over 1/2 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Q2 Productivity | Tuesday, Aug. 10, 8:30 am, et | Up 3.5% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| 3-year Treasury Note Auction | Tuesday, Aug. 10, 1:15 pm, et | None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Consumer Price Index | Wednesday, Aug. 11, 8:30 am, et | Up 0.5%, Core up 0.5% | Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates. |
| 10-year Treasury Note Auction | Wednesday, Aug. 11, 1:15 pm, et | None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Producer Price Index | Thursday, Aug. 12, 8:30 am, et | Up 0.6%, Core up 0.5% | Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates. |
| Weekly Jobless Claims | Thursday, Aug. 12, 8:30 am, et | 400K | Important. An indication of employment. Higher claims may result in lower rates. |
| 30-year Treasury Bond Auction | Thursday, Aug. 12, 1:15 pm, et | None | Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates. |
| U of Michigan Consumer Sentiment | Friday, Aug. 13, 10:00 am, et | 82.0 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Productivity
Productivity is the rate at which goods or services are produced. It is most commonly defined in terms of labor, which is the contribution of people to the process. Labor costs represent about two-thirds of the value of the output produced. The Bureau of Labor Statistics of the US Department of Labor releases the most widely cited productivity statistics quarterly and annually. Increased productivity is often credited for economic growth with little signs of inflation.
Productivity is significant in that as it increases, businesses can produce more with the same or less input. This wealth-building effect is vital to the US economy. As productivity increases, the US economy generally performs better. As productivity decreases, the economy generally suffers. While the bond market generally favors signs of weakness in the economy, bonds tolerate growth if the economic environment shows little or no inflationary pressures. Keep in mind that rates remain very favorable. Now is a great time to avoid the uncertainty surrounding continued market volatility.