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Market
Comment
Mortgage bond prices finished the sharply lower which put upward pressure on rates. Rates started the week flat, worsened Tuesday and Wednesday, but recovered a little bit of the losses in response to the employment report Friday morning. The data was mixed with some signs of economic weakness. Jolts jobs were 7.594M vs 7.3M. Consumer confidence was 91.2 vs 94.7. FHFA house price index fell 0.1% vs the expected 0.2% increase. ADP employment was 98K vs 113K. Unemployment was 4.2% vs 4.3%. Non-farm payrolls rose 57K vs 110K. Mortgage interest rates finished the week worse by approximately 1/4 to 3/8 of a discount point amid considerable volatility.
LOOKING
AHEAD
|
Economic
Indicator |
Release
Date &
Time |
Consensus
Estimate |
Analysis
|
| ISM Index |
Monday, July 6,
10:00 am, et
|
54.4
|
Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
|
| Weekly ADP Employment |
Tuesday, July 7,
8:30 am, et
|
30K
|
Important. An indication of employment. Weakness may bring lower rates.
|
| Trade Data |
Tuesday, July 7,
8:30 am, et
|
$78.8B deficit
|
Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
|
| Fed Minutes |
Wednesday, July 8,
2:00 pm, et
|
None
|
Important. Details of the last Fed meeting will be thoroughly analyzed.
|
| Weekly Jobless Claims |
Thursday, July 9,
8:30 am, et
|
200K
|
Important. An indication of employment. Higher claims may result in lower rates.
|
| Existing Home Sales |
Thursday, July 9,
10:00 am, et
|
4.2M
|
Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
|
Trade Data
In the distant past the US economy tended to be viewed as relatively unaffected by economic activity in other countries. However, increased trades with other countries and an increased reliance on foreign purchases of US debt have generated a market awareness of trade-related issues. The exchange rate of the dollar and foreign trade flows are interrelated. One must buy dollars to purchase US exports, and sell dollars to buy imports. Likewise, foreign investment in US debt requires the purchase of US dollars, and is thus affected by exchange rates.
Each month the Commerce Department gathers an enormous amount of detailed data on exports and imports. The data is broken between goods and services trade. The overall trade balance is the dollar difference between US exports and imports on a seasonally adjusted basis. The report also highlights trade flows between the US and various partners. Since the mid-1970’s, US imports of consumer and capital goods have exceeded exports, so a merchandise trade deficit has existed. The US has always maintained a service trade surplus, and because this surplus is not enough to offset the merchandise trade deficit, a net export deficit has resulted. Due to the overwhelming amount of data considered, trade is difficult to forecast, and can present surprises. For a variety of reasons, the financial markets will often be unaffected by surprises in trade data. However, the data still has the ability to cause mortgage interest rate volatility.
Be cautious heading into economic releases. The Fed is clear that data will dictate their future course of action. Mortgage rates have been choppy surrounding data releases. Now is a great time to take advantage of the current levels.
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