This Week’s Forecast
Last week’s economic calendar was very light; but this week, we’ll see the exact opposite as reports flood the headlines near the end of the week.
Along with more news coming from overseas… the week’s action could cause home loan rates to change trend. Bond prices have been rocketing higher with home loan rates moving lower… but history tells us that a reversal is in store – it’s just a matter of when.
On Wednesday, we’ll see the Retail Sales figures for June, as well as the Meeting Minutes from the past Fed meeting. Although the Fed hasn’t made any major policy changes as of late, the meeting minutes are still closely watched by the markets for any stray comments or discussion on matters such as inflation or the “extended period” language regarding rates.
Things heat up on Thursday with a number of reports on manufacturing and inflation. The Philadelphia Fed Index and the Empire State Index will both be released Thursday morning – giving us a detailed look at the manufacturing sector. We’ll also see the latest reports on Capacity Utilization and Industrial Production, as well as the Producer Price Index (PPI), which measures inflation at the wholesale level. The day after the PPI is reported, we’ll see the Consumer Price Index (CPI), which measures inflation at the consumer level.
Remember, inflation is the archenemy of Bonds and home loan rates, so it will be important to see what these reports reveal.
We’ll also see the weekly Initial Jobless Claims report on Thursday morning. Last week’s number came in better than expected and showed an improvement over the previous report, which gave the financial markets a glimmer of hope. It also gave Bond investors an excuse to take a little profit off the table – since Bonds have been priced for perfection, and any blip in the economic data is providing reason to preserve profits.
In addition to those reports, the Treasury Department will auction $69 Billion this week. The auctions will consist of $35 Billion in 3-year Notes on Monday, $21 Billion in 10-year Notes on Tuesday and $13 Billion in 30-Years on Wednesday. The good news is, the $69 Billion total represents the lowest offering in a year – and when this “low” figure was announced last week, it helped Bond prices improve.
Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. Mortgage Bonds have been inching higher – helping home loan rates move lower – and making this an ideal time to review your current loan or purchase a new home!