Brief note from the desk of Miguel
Velazco Sr. MBA
Week of: Monday, April 16, 2012
Present Market Conditions
Monday’s bond market has opened in positive territory
despite some much stronger than expected economic news. The stock markets are
mixed following the new with the Dow posting a 62 point gains and the Nasdaq
down 16 points. The bond market is currently up which will likely improve this
morning’s mortgage rates by approximately .125 of a discount point.
Department posted March's Retail Sales report early this morning, announcing a
0.8% spike in spending. This was nearly triple the 0.3% increase that
forecasted, meaning consumers spent much more last month than many had thought.
The size of the difference between forecasts and the actual increase is
certainly negative news for bonds, but the 0.8% increase is a fairly rapid rate
of spending growth. The concern for bond traders is that since consumer
spending makes up over two-thirds of the U.S. economy, quickly rising consumer
spending levels raises the outlook for overall economic growth. And because
long-term securities such as mortgage related bonds tend to thrive in weaker
economic conditions, today’s data is bad news for bonds and mortgage rates.
However, it appears that traders aren’t as concerned with the data as we had
expected. Hopefully, this will continue throughout the day.
March's Housing Starts will be posted early tomorrow
morning. This report gives us a measurement of housing sector strength and
mortgage credit demand by tracking starts of new home construction and the
number of permits issued for future starts. This data usually doesn't cause
much movement in mortgage pricing unless it varies greatly from forecasts. It
is expected to show a slight increase in construction starts of new homes. Good
news for the bond market and mortgage rates would be a decline in home starts,
indicating housing sector weakness.
Also tomorrow, we
will get March's Industrial Production data at 9:15 AM ET. It gives us a
measurement of output at U.S. factories, mines and utilities, translating into
an indication of manufacturing sector strength. Current forecasts are calling
for an increase in production of 0.2%. This data is considered to be only
moderately important to rates, so it will take more than just a slight variance
to influence bond trading and mortgage pricing. Signs of manufacturing sector
strength are considered negative news for mortgage rates.
it will likely be a moderately active week for mortgage rates. However, unlike
many weeks, the most important news comes during the early part of the week
(today). Friday appears to be the best candidate for least active day, but
Wednesday may also be fairly quiet. The stock markets will also influence bond
trading and mortgage pricing this week as we get more corporate earnings
releases, low interest to purchase.