Market Comment
Mortgage bond prices finished the week higher which put downward pressure on rates. Most improvements came Tuesday and Thursday. There was very little data. Weekly jobless claims were 373K vs the expected 348K. The Fed minutes showed some internal debate on continued MBS purchases and stated: “In coming meetings, participants agreed to continue assessing the economy’s progress toward the Committee’s goals and to begin to discuss their plans for adjusting the path and composition of asset purchases. In addition, participants reiterated their intention to provide notice well in advance of an announcement to reduce the pace of purchases.” Mortgage interest rates finished the week better by approximately 3/8 to 1/2 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Consumer Price Index | Tuesday, July 13, 8:30 am, et | Up 0.4%, Core up 0.4% | Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates. |
| Producer Price Index | Wednesday, July 14, 8:30 am, et | Up 0.5%, Core up 0.5% | Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates. |
| Fed “Beige Book” | Wednesday, July 14, 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, July 15, 8:30 am, et | 475K | Important. An indication of employment. Higher claims may result in lower rates. |
| Philadelphia Fed Survey | Thursday, July 15, 8:30 am, et | 29.8 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Industrial Production | Thursday, July 15, 9:15 am, et | Up 0.8% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Capacity Utilization | Thursday, July 15, 9:15 am, et | 75.6% | Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates. |
| Retail Sales | Friday, July 16, 8:30 am, et | Up 0.4% | Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates. |
| U of Michigan Consumer Sentiment | Friday, July 16, 10:00 am, et | 87.8 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Fed Testimony
The Fed Chair delivers the Federal Reserve’s semiannual report on monetary policy, familiarly called the Humphrey-Hawkins report, to both the House and Senate Banking Committees in February and July. The report is one of the most important speeches given by the Fed Chair and was originally mandated by the Full Employment and Balanced Growth Act. The remarks made to each committee tend to be identical in nature and address basic economic principles. The areas addressed tend to be the overall state of the US economy, recent developments, economic fundamentals, foreign developments, economic outlook, ranges for growth, and concluding remarks. Senator Hubert Humphrey and Representative Augustus Hawkins originally sponsored the legislation in 1977. There is a potential for market volatility anytime the Fed Chair speaks. The testimony starts Thursday. A cautious approach to rate decisions is prudent heading into the event.