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Market
Comment
Mortgage bond prices finished the week a little higher which put some downward pressure on rates. Rates started the week flat, worsened mid-week, and bounced back to finish slightly positive. Continued developments in the Middle East along with oil price volatility factored heavily into trading. The data also gave some reprieve on the inflation front. Consumer prices rose 0.5% as expected. Core prices rose 0.2% vs 0.3%. PPI rose 1.1% vs 0.7%. The core rose 0.4% vs 0.5%. Weekly jobless claims were 229K vs 219K. Consumer Sentiment was 48.9 vs 46. Weekly ADP employment was 29K vs 35.75K the prior week. The trade deficit was $55.9B vs $56.1B. Existing home sales were 4.17M vs 4.07M. 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
|
| Industrial Production |
Monday, June 15,
9:15 am, et
|
Up 0.2%
|
Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates.
|
| Capacity Utilization |
Monday, June 15,
9:15 am, et
|
76.2%
|
Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates.
|
| NAHB Housing Index |
Monday, June 15,
10:00 am, et
|
37
|
Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates.
|
| Housing Starts |
Tuesday, June 16,
8:30 am, et
|
1.44M
|
Important. A measure of housing sector strength. Weakness may lead to lower rates.
|
| Retail Sales |
Wednesday, June 17,
8:30 am, et
|
Up 0.5%
|
Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates.
|
| Fed Meeting Adjourns |
Wednesday, June 17,
2:15 pm, et
|
No rate changes
|
Important. Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting.
|
| Leading Economic Indicators |
Thursday, June 18,
10:00 am, et
|
Up 0.1%
|
Important. An indication of future economic activity. A smaller increase may lead to lower rates.
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New Fed Chair
The new Chairman of the Federal Reserve, Kevin Warsh, will face his first important test this week in his new role. The Fed is scheduled to adjourn Wednesday afternoon, and recent precedent has a televised press conference by the Fed Chair to follow. This will be an opportune time for Warsh to express his thoughts on the state of the economy and the Fed’s path ahead. However, some analysts predict he may not provide as much forward guidance as we’ve seen from his predecessors.
Warsh made comments in the past that he might not continue the press conferences as frequently. He stated at his April confirmation hearing, “If you ask me my true personal opinion right now, Fed chairs and other central bankers around the FOMC, they speak quite frequently” and added “I think truth-seeking is more important than repetition. If one has a press conference, one wants to deliver some important news.”
A cautious approach to float/lock decisions is prudent surrounding the press conference. Warsh will likely take a careful approach in setting the tone for his new position as Fed Chair. The Fed’s role of price stability and low inflation have not changed. However, markets often react to messengers and Warsh’s first message will be very important.
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