Market review June 11th

Market CommentMortgage bond prices fell last week pushing mortgage interest rates considerably higher. The weakness followed Fed Chairman Bernanke’s remarks indicating inflation risks are on the upside. Global economic growth, inflation fears, and the European Central Bank rate hike resulted in a diminished appetite for US backed securities from foreign central banks. This initial selling pressure snowballed resulting in US based fixed income securities taking a beating. For the week, interest rates on government and conventional loans rose by about 1 full discount point.
The consumer price index Friday will be the most important event this week. The Treasury auction, retail sales, Fed "Beige Book", producer price index, industrial production, capacity use, and consumer sentiment data will also be important.
LOOKING AHEAD
EconomicIndicator
ReleaseDate & Time
ConsensusEstimate
Analysis
10-year Treasury Note Auction
Tuesday, June 12,1:30 pm, et
None
Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Retail Sales
Wednesday, June 13,8:30 am, et
Up 0.6%
Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates.
Business Inventories
Wednesday, June 13,10:00 am, et
Up 0.2%
Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates.
Fed "Beige Book"
Wednesday, June 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.
Producer Price Index
Thursday, June 14,8:30 am, et
Up 0.5%,Core up 0.2%
Important. An indication of inflationary pressures at the producer level. Weakness may lead to lower rates.
Consumer Price Index
Friday, June 15,8:30 am, et
Up 0.6%,Core up 0.2%
Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates.
Industrial Production
Friday, June 15,9:15 am, et
Up 0.1%
Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Capacity Utilization
Friday, June 15,9:15 am, et
81.5%
Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment
Friday, June 15,10:00 am, et
88.0
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
DataThe data releases this week provide a good opportunity for a clear trading pattern to develop if the results are relatively consistent. Recent data has been mixed and the demand for mortgage bonds has been terrible. Traders remain uncertain as to the future of the economy and the threat of inflation is looming over the financial markets. The producer price index and consumer price index will provide insight into the state of inflation. In addition, emerging signs of economic weakness in the other data could bode well for mortgage interest rates. However, the recent trend has been negative and higher mortgage interest rates are not good for the struggling housing market. Be cautious heading into the data this week in case the negative trend continues.
To unsubscribe, please hit "reply" and include unsubscribe in the subject line.
Copyright 2007. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com The information contained herein is believed to be accurate, however no representation or warranties are written or implied.