MARKET COMMENT
Mortgage bond prices finished the week lower which put a little upward pressure on rates. Conventional rates were higher the beginning of the week, but we chipped away at the losses Wednesday afternoon and Thursday morning. The data was mixed. Producer prices rose 0.4% vs 0.1%. The core, which excludes volatile food and energy prices, rose 0.4% vs 0.3%. Consumer prices rose 0.2% as expected. The core also rose 0.2% as expected. Weekly jobless claims were 898K vs 830K. The Philadelphia Fed index was 32.3 vs 16. Retail sales surprised to the upside with a surge of 1.9% vs the expected 0.6% increase. Production fell 0.6%, expected up 0.8%. Capacity use was 71.5% vs 72.1%. Sentiment was 81.2 vs 82. Mortgage interest rates finished the week unchanged to worse by 1/8 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| NAHB Housing Index | Monday, Oct. 19, 10:00 am, et | 83 | Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates. |
| Housing Starts | Tuesday, Oct. 20, 8:30 am, et | 1.477M | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| 20-year Treasury Auction | Wednesday, Oct. 21, 1:15 pm, et | None | Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates. |
| Fed “Beige Book” | Wednesday, Oct. 21, 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, Oct. 22, 8:30 am, et | 870K | Important. An indication of employment. Higher claims may result in lower rates. |
| Existing Home Sales | hursday, Oct. 22, 10:00 am, et | 6.25M | Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates. |
| Leading Economic Indicators | Thursday, Oct. 22, 10:00 am, et | Up 0.8% | Important. An indication of future economic activity. A smaller increase may lead to lower rates. |
| 10-year Treasury TIPS Auction | Thursday, Oct. 22, 1:15 pm, et | None | Important. TIPS will be auctioned. Strong demand may lead to lower mortgage rates. |
FED “BEIGE BOOK”
The Fed “Beige Book” is a summary of economic conditions from each of the 12 Federal Reserve regional districts. The release takes place eight times a year approximately two weeks ahead of each of the Federal Open Market Committee meetings. The report is used at the FOMC meetings, which tends to be one of the most influential events in the market.Market participants are continually attempting to determine what FOMC interest rate policy will be ahead of the next meeting. Any deviation from expectations usually results in extreme short-term market volatility. The timing of the “Beige Book” provides analysts a valuable look at one of the many factors the FOMC considers in setting interest rate policy. If the “Beige Book” shows signs of inflationary pressures, the Fed’s ability to keep rates lower may be somewhat restricted. However, if the report shows signs of difficulties, the Fed may keep rates low to stimulate the economy. Be cautious heading into this release.