Mortgage Market in Review from Monte Hill week of 7/09/2007
Mortgage Market in Review
Week of July 9, 2007 Volume 14, Issue
Market Comment
Mortgage bond prices fell last week pushing mortgage interest rates significantly higher. Thin trading conditions associated with the shortened trading week resulted in some extreme negative market movements. That trading environment coupled with stronger than expected factory orders and non-farm payrolls figures sent bond prices tumbling and interest rates higher. For the week, interest rates on government and conventional loans rose by about 5/8 of a discount point.
The retail sales data Friday will be the most important event this week. Trade data will also be important.
Looking Ahead |
Economic Indicator | Release Date and Time | Consensus Estimate | Analysis |
Consumer Credit | Monday, July 9, 3:00 pm, et | Up $6 billion | Low importance. A significantly larger than expected increase may lead to lower mortgage interest rates. |
Trade Data | Thursday, July 12, 8:30 am, et | $60 billion deficit | Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
Retail Sales | Friday, July 13, 8:30 am, et | Up 0.3% | Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates. |
Business Inventories | Friday, July 13, 10:00 am, et | Up 0.4% | Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates. |
Michigan Consumer Sentiment | Friday, July 13, 10:00 am, et | 85.5 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Business
Inventories
The report on business inventories basically gives a broader look at the durable goods, factory orders, and retail sales reports. Not only is this report an important part of the investment component of the GDP, but it also provides additional evidence about the economy in the upcoming months. Changes in business inventories slow as the economy approaches a peak, and rise as the economy approaches the trough of a recession. Therefore the change in business inventories is a leading indicator of GDP. The data for this report, which are published by the Department of Commerce’s Census Bureau, comes from a monthly survey of inventories, orders, and manufacturers’ shipments, in addition to the merchant wholesalers and retail trade surveys.
Not a great amount of attention is typically paid to this report due to the fact that much of the data is already available and surprises are rare. The only new information in this report is retail inventories. However, given the recent negative trend in mortgage bonds, this report may be more of an influence.
The potential for mortgage interest rates to push higher is real considering oil price pressures and some signs of strength in the US economy. However there still remains some uncertainty and a possibility rates could bounce back a bit following the recent jump higher.
It is important to remember that interest rates tend to improve slowly while negative movements tend to happen fast and furiously. Capitalizing on interest rates at the current levels protects against uncertainty surrounding future interest rate developments.
Monte J. Hill
www.HouseHunterBob.com