MIG Market Watch, November 16th, 2020
MARKET COMMENT
Mortgage bond prices finished the week lower which put upward pressure on rates. We started the week on a terrible note Monday morning as stocks gained 1500 points in early trading and rates rose sharply. The Fed continued their MBS purchases which erased some of the losses but not all of them. Both CPI and the core were unchanged vs the expected 0.2% readings. Tame inflation readings generally bode well for fixed income investments such as mortgage-backed securities. Weekly jobless claims were 709K vs the expected 755K. The headline PPI number rose 0.3% vs 0.2%. However, the core, which excludes volatile food and energy prices, rose 0.1% vs 0.2%. Consumer Sentiment was 77.0 vs the expected 79.6. Mortgage interest rates finished the week worse by approximately 1/8 to 1/4 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Retail Sales | Tuesday, Nov. 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. |
| Industrial Production | Tuesday, Nov. 17, 9:15 am, et | Up 0.8% | Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates. |
| Capacity Utilization | Tuesday, Nov. 17, 9:15 am, et | 72.1% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
| Business Inventories | Tuesday, Nov. 17, 10:00 am, et | Up 0.4% | Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates. |
| NAHB Housing Index | Tuesday, Nov. 17, 10:00 am, et | 85 | Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates. |
| Housing Starts | Thursday, Nov. 19, 8:30 am, et | 1.44M | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Philadelphia Fed Survey | Thursday, Nov. 19, 10:00 am, et | 22 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Existing Home Sales | Thursday, Nov. 19, 10:00 am, et | 6.45M | Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates. |
| 10-year Treasury TIPS Auction | Thursday, Nov. 19, 1:15 pm, et | None | Important. TIPS will be auctioned. Strong demand may lead to lower mortgage rates. |
Retail Sales
Retail sales data is the first indication of weakness or strength in consumer spending released each month. The Bureau of the Census of the US Department of Commerce provides information on how much the consumer spends on the purchase of goods. This data provides the consumption part of the gross domestic product. Retail sales data represents merchandise sold for cash or credit by retailers. Durable goods, such as autos, make up 35% of the figure. The balance consists of non-durables such as gasoline, restaurants, and general merchandise. There are several drawbacks to the report. The data covers purchases of goods only, not services. It is also not adjusted for inflation and is extremely volatile. Economists are always concerned economic uncertainty will curtail consumer spending.
