MIG Market Watch, December 14th, 2020
MARKET COMMENT Mortgage bond prices finished the week unchanged to slightly higher which helped rates remain relatively steady. We started the week on a slightly positive note Monday when stocks struggled that morning. The data was mixed with some weaker economic readings and some solid consumer data. Revised Q3 productivity was 4.6% vs the expected 4.9%. Weekly jobless claims were 853K vs the expected 730K. Inflation data was tame. Both the headline consumer price index and the core rose 0.2% vs the expected 0.1% increases. Producer inflation followed suit as both the headline and core rose 0.1% vs the expected 0.2% increases. Consumer sentiment was 81.4 vs 74.8 which is solid considering the uncertainty amid the pandemic. Mortgage interest rates finished the week unchanged to better by 1/8 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Industrial Production | Tuesday, Dec. 15, 9:15 am, et | Up 0.5% | Important. A measure of manufacturing sector strength. A lower-than-expected increase may lead to lower rates. |
| Capacity Utilization | Tuesday, Dec. 15, 9:15 am, et | 73.0% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
| Retail Sales | Wednesday, Dec. 16, 8:30 am, et | Down 0.1% | Important. A measure of consumer demand. Weakness may lead to lower mortgage rates. |
| NAHB Housing Index | Wednesday, Dec. 16, 10:00 am, et | 89 | Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates. |
| Fed Meeting Adjourns | Wednesday, Dec. 16, 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. |
| Weekly Jobless Claims | Thursday, Dec. 17, 8:30 am, et | 840K | Important. An indication of employment. Higher claims may result in lower rates. |
| Housing Starts | Thursday, Dec. 17, 8:30 am, et | 1.52M | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Philadelphia Fed Survey | Thursday, Dec. 17, 10:00 am, et | 21.7 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
INDUSTRIAL PRODUCTION The Federal Reserve releases the Industrial Production report each month. It is a real measure of output from manufacturing, mining, electric, and gas utilities. The data is significant in that it provides an indicator of the state of the economy. Analysts use the data to attempt to determine market direction. The Fed uses the data to help set the course for monetary policy. Generally, the Fed likes to see steady growth in the economy with little price pressures. They signaled to the market for some time that they are data dependent and will continue to keep rates low to spur economic growth amid the pandemic.
Mortgage interest rates usually react favorably to weaker than expected industrial production data. In times of economic weakness investors often move out of stocks and into mortgage bonds. When things look good investors often move out of bonds and back into stocks.
Now is a great time to take advantage of mortgage interest rates at these historically favorable levels.
