Market Reports
A Mortgage Update from Jay Skwierawski for the week of July 12
Hello Everybody!
Interest rates declined slightly last week. The market rallied on Tuesday and Wednesday, only to sell off on Thursday and Friday. The catalyst for the early week rally was a speech by Federal Reserve Chairman Ben Bernanke, who said the Fed may continue to provide emergency loans to investment banks to help them overcome credit problems. This led to improvement in the bond market because the markets saw this as a sign that the Fed is willing to take action to maintain stability and counter any turbulence that may occur. The rally came to a quick halt when Iran test fired nine medium to long range missiles and reminded the markets of the instability in that region of the world. Then on Friday, there were questions out regarding the future of Freddie Mac and Fannie Mae, which caused a substantial drop in the price of mortgage bonds, and an increase in rates. In addition, we saw the price of oil spike up to a new record high over $147 per barrel.
There wasn't much news out on the economy last week:
Crude oil inventories increased. That bodes well for the price of oil, as it appears that our demand is waning. First time unemployment claims came in 60,000 less than expected. Consumer sentiment came in slightly higher than expected, but still at a very low number. The U.S. trade deficit decreased. None of these reports moved the markets as much as the news about Fannie Mae and Freddie Mac.
This week, we have several reports due to be released, including some market movers.
Today - The Produce Price Index was reported at +1.8% in June, the largest one month increase since November, 2007, and higher than the +1.3% that the markets were expecting. Year over year PPI for the year ending in June was +9.2%, the biggest year over year showing since June, 1981. The core rate, excluding volatile food and energy costs was up .2%, slightly less than the markets were expecting. Also, retail sales were reported at +.1%, lower than the markets were expecting. This is a sign that the boost in sales received by the tax rebate checks may already be fading. The Empire State Index rose slightly, but was still negative.
Wednesday - Consumer Price Index (CPI) and Core CPI - HIGH impact on rates
Wednesday - Industrial Production and Factory Utilization - Moderate impact on rates
Wednesday - Federal Open Market Committee minutes are released - Moderate
Wednesday - Crude Oil Inventories - Moderate, but HIGH lately
Thursday - Housing starts and new building permits - Moderate
Thursday - Initial unemployment claims - Moderate
Thursday - Philadelphia Fed Index - HIGH
In addition, the markets will continue to monitor developments on the Fannie Mae and Freddie Mac story, banks in trouble, and anything that might affect the price of oil.
Later this week, be sure to watch for my "Mortgage Minute or two" on Fannie Mae and Freddie Mac and their importance to our business and the economy as a whole.
I will keep you posted on any major developments as the week progresses. In the meantime, have a great week!
The chart above shows the price of mortgage bonds. Remember that as the price goes up, the rates go down. Green is good, red is bad. Up is good, and down is bad! The chart tracks the price of bonds going back three months. You will notice that we spent a couple of days above the 200 day moving average last week. That was a very good thing. It's only unfortunate that it didn't hold. That would have meant we would be seeing lower rates before higher rates.
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
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