|
Market
Comment
Mortgage bond prices rose last week pushing mortgage interest rates
lower. The Fed took center stage with another rate cut exactly as
expected and indicated "the committee expects inflation to
moderate in the coming quarter." This statement helped bonds
rally considerably. The majority of data released came in as
expected with the exception of the employment report that was
released Friday. Non-farm payrolls fell 20,000 in April, less than
the expected decrease of 75,000. For the week, interest rates
on government and conventional loans fell by about 3/8 of a discount
point.
The preliminary productivity data Wednesday will
be the most important event this week. Look for the Treasury
auctions to provide an indication of foreign demand for US debt.
Trade data Friday has the potential to result in market volatility
so be cautious floating into the data releases.
LOOKING
AHEAD
|
Economic
Indicator |
Release
Date &
Time |
Consensus
Estimate |
Analysis
|
| Preliminary
Q1 Productivity |
Wednesday, May 7,
1:30 pm, et
|
Up 1.2%
|
Important.
A measure of output per hour. Improvement may lead to lower
mortgage rates.
|
| 10-year
Treasury Note Auction |
Wednesday, May 7,
1:30 pm, et
|
None
|
Important.
Notes will be auctioned. Strong demand may lead to lower
mortgage rates.
|
| Consumer
Credit |
Wednesday, May 7,
3:00 pm, et
|
Up $6.3 billion
|
Low
importance. A significantly larger than expected increase may
lead to lower mortgage interest rates.
|
| 30-year
Treasury Bond Auction |
Thursday, May 8,
1:30 pm, et
|
None
|
Important.
Bonds will be auctioned. Strong demand may lead to lower
mortgage rates.
|
| Trade
Data |
Friday, May 9,
8:30 am, et
|
$61.3 billion deficit
|
Important.
Affects the value of the dollar. A falling deficit may
strengthen the dollar and lead to lower rates.
|
Productivity
The latest advance gross domestic product data
indicated the US economy grew at a 0.6 percent rate in the first
quarter. Fed officials remain concerned that inflation is rising and
the economy is heading towards recession. Many analysts believe the
economy is already in one. This data was mixed with the GDP price
index rising 2.6% in the first quarter compared to a 2.4% increase
in the fourth quarter.
Productivity is the rate at which goods or
services are produced. It is most commonly defined in terms of
labor, which is the contribution of people to the process. Labor
costs represent about two thirds of the value of the output
produced. The Bureau of Labor Statistics of the US Department of
Labor releases the most widely cited productivity statistics
quarterly and annually. Increased productivity is often credited for
economic growth with little signs of inflation.
Productivity is significant in that as it
increases, businesses can produce more with the same or less input.
This wealth building effect is vital to the US economy. As
productivity increases, the US economy generally performs better. As
productivity decreases, the economy generally suffers.
While the bond market generally favors signs of
weakness in the economy, bonds tolerate growth as long as the
economic environment shows little or no inflationary pressures.
Unfortunately, inflation has escalated as of late.
Keep in mind that rates remain historically very
favorable. Now is a great time to avoid the uncertainty surrounding
continued market volatility by locking your loan. Capitalizing on
current levels is prudent to protect against future volatility.
To
unsubscribe, please hit "reply" and include unsubscribe in
the subject line.
Copyright
2008. All Rights Reserved. Mortgage Market
Information Services, Inc. www.ratelink.com
The information contained herein is
believed to be accurate, however no representation or warranties are
written or implied.
|
