MARKET COMMENT
Mortgage bond prices finished the week sharply lower which pushed rates higher. We started the week neutral but experienced higher rates Tuesday through Friday. News articles attributed weakness across the entire spectrum of debt securities on anticipation of increased government spending tied to election outcomes. The data was mixed. ADP payrolls fell 123K vs the expected 60K addition. Factory orders rose 1% vs the expected 0.7% increase. Construction spending rose 0.9% which was near expectations. The ISM Index came in at 60.7% vs the expected 56.7%. Jobless claims were 787K vs the expected 765K. Unemployment was 6.7% as expected. Payrolls fell 140K vs the expected 70K increase. Mortgage interest rates finished the week worse by approximately 5/8 to 3/4 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Consumer Price Index | Wednesday, Jan. 13, 8:30 am, et | Up 0.4%, Core up 0.2% | Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates. |
| Fed “Beige Book” | Wednesday, Jan. 13, 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, Jan. 14, 8:30 am, et | 780K | Important. An indication of employment. Higher claims may result in lower rates. |
| Producer Price Index | Friday, Jan. 15, 8:30 am, et | Up 0.3%, Core up 0.2% | Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates. |
| Retail Sales | Friday, Jan. 15, 8:30 am, et | Down 0.3% | Important. A measure of consumer demand. Weakness may lead to lower mortgage rates. |
| Industrial Production | Friday, Jan. 15, 9:15 am, et | Up 0.3% | Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates. |
| Capacity Utilization | Friday, Jan. 15, 9:15 am, et | 73.5% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
| Business Inventories | Friday, Jan. 15, 10:00 am, et | Up 0.2% | Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates. |
| U of Michigan Consumer Sentiment | Friday, Jan. 15, 10:00 am, et | 81 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
FUNDAMENTAL DATA
Economic data is usually the number one reason mortgage interest rates move daily. While the Fed has taken a dominant role lately with their MBS purchases the data still can move the financial markets in the short-term. Data is compiled from numerous sources and comes in two flavors, economic growth and inflation. Some releases are more important than others and thus are more likely to cause wider swings in mortgage rates. Rates move in relation to the deviation from expectations. We have significant releases starting Wednesday. The potential for mortgage interest rate volatility is greater as a result. Any indication of strength in the data will likely result in higher mortgage interest rates.