Market Comment - Week of October 13th, 2008
Mortgage bond prices finished last week lower pushing mortgage interest rates considerably higher. The Federal bailout plan along with an unexpected Fed rate cut dominated almost all headlines as uncertainty loomed and the liquidity crisis continued. Fear gripped the markets, which caused many investors to exit stocks and bonds to head for cash positions. Trading in the financial markets was extremely volatile. The only bright light appeared to be a precipitous decline in oil prices. For the week, interest rates on government and conventional loans rose by over a full discount point.The consumer price index Thursday will be the most important data release this week. The financial markets remain volatile as traders digest the bailout developments. Expect the up and down trading pattern to continue.
Here are the Economic Factors this week:
Columbus Holiday
10/13/08
Consensus Estimate: None
Analysis:Important. Shortened trading week may lead to market volitility when trading resumes Tuesday.
Producer Price Index
10/15/08
Consensus Estimate: Down .3%, Core up .2%
Analysis:Important. A indication of inflationary pressures at the producer level. Lower figures may lead to lower rates.
Retail Sales
10/15/08
Consensus Estimate: Down .4%
Analysis: Important. A measure of consumer demand. Weakness may lead to lower mortgage rates.
Fed "Beige Book"
10/15/08
Consensus Estimate: None
Analysis: Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates.
Consumer Price Index
10/16/08
Consensus Estimate: Up .1%, Core up .2%
Analysis: Important. A measure of inflation at the consumer level. Lower level may lead to lower rates.
Industrial Production
10/16/08
Consensus Estimate: Down .8%
Analysis: Important. A measure of manufacturing sector strength. Weekness may lead to lower rates.
Capacity Utilization
10/16/08
Consensus Estimate: 78%
Analysis: Important. A figure above 85% is viewed as inflationary. Weekness may lead to lower rates.
Housing Starts
10/17/08
Consensus Estimates: Down 1.7%
Analysis: Important. A measure of housing sector strength. Larger than expected decreases may lead to lower rates.
Fundamental Week
The abundance of fundamental data this week provides a good opportunity for mortgages to improve. If the data shows weakness in the economy with little or no inflationary pressures then it is possible for mortgage bonds to rally resulting in mortgage interest rate decreases. However, the data may be completely overshadowed by general financial fears and uncertainties throughout the globe.Mortgage interest rates remain historically favorable. Now is a great time to avoid the uncertainty surrounding continued market volatility.
The abundance of fundamental data this week provides a good opportunity for mortgages to improve. If the data shows weakness in the economy with little or no inflationary pressures then it is possible for mortgage bonds to rally resulting in mortgage interest rate decreases. However, the data may be completely overshadowed by general financial fears and uncertainties throughout the globe.Mortgage interest rates remain historically favorable. Now is a great time to avoid the uncertainty surrounding continued market volatility.
This information is provided by WR Starkey Mortgage.
Loan Officers:
Sharon Lintault
David Lowrimore
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