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Market
Comment
Mortgage bond prices finished the week slightly higher which put a little downward pressure on rates. Equities were very volatile as the U.S. and China went back and forth with tariff warnings. MBS prices traded within a very narrow range with a slight positive bias. The government data continued to be delayed due to the shutdown. The Philadelphia Fed Survey was 36.2 vs 31. NAHB Housing was 37 vs 33. The Fed Beige Book reported that employment was stable in recent weeks, employers expected headcount reductions due to AI, and that U.S. economic activity was little changed. Mortgage interest rates finished the week better by approximately 1/8 of a discount point.
LOOKING
AHEAD
|
Economic
Indicator |
Release
Date &
Time |
Consensus
Estimate |
Analysis
|
|
Leading Economic Indicators
|
Monday, Oct. 20,
10:00 am, et
|
Up 0.1%
|
Important. An indication of future economic activity. Weakness may lead to lower rates.
|
| 20-year Treasury Bond Auction |
Wednesday, Oct. 22,
1:15 pm, et
|
None
|
Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
|
| Existing Home Sales |
Thursday, Oct. 23,
10:00 am, et
|
4.1M
|
Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
|
| Consumer Price Index |
Friday, Oct. 24,
8:30 am, et
|
Up 0.4%,
Core up 0.3%
|
Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates.
|
| U of Michigan Consumer Sentiment |
Friday, Oct. 24,
10:00 am, et
|
55
|
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
|
| New Home Sales |
Friday, Oct. 24,
10:00 am, et
|
745K
|
Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
|
Leading Economic Indicators
The index of leading economic indicators (LEI) is a weighted average of eleven economic variables that “lead” the business cycle. It is constructed for forecasting future aggregate economic activity. The eleven variables that make up the LEI measure workers’ hours, initial unemployment claims, new factory orders, vendor performance, contracts and orders for plant and equipment, new housing permits, changes in unfilled orders, prices of raw materials, stock prices, money supply and consumer expectations. Each of the variables that comprise the index tends to predict (or lead) economic activity. For example, new orders for manufactured goods, new orders for plant and equipment, and new building permits are all direct measures of the amount of future production being planned for the economy.
Analysts monitor the LEI to predict future economic growth. When the LEI report is up, mortgage market participants expect credit demand to increase and inflationary pressures to build. Thus, when the LEI report is rising, interest rates tend to rise as well. The LEI report is a valuable forecasting device that often correctly predicts economic turning points. The percentage change in the LEI is reported monthly and is an indication of the activity that will occur within the next three to six months. The LEI tends to turn down before peaks in the business cycle. Continuous declines are generally accepted as evidence that a recession continues. Nine of the eleven components that make up this index are known before the release of the report, so the index is easier for economists to predict than other data releases. Thus, although this is important predictive data for market participants, major surprises are not common with the release of this data.
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