Mortgage/Economic Outlook for week of November 17, 2008
MARKET COMMENTARY: : This week’s barrage of economic data should be generally supportive of the prospects for steady to perhaps fractionally lower mortgage interest rates. The proverbial “fly-in-the-ointment” in terms of restricting mortgage rates ability to move notably lower will be continuing concerns surrounding the massive amount of money Uncle Sam will be looking to borrow in the coming months. More supply tends to dampen demand – not only for Treasury obligations – but for mortgage-backed securities as well.
Mortgage investors have already priced-in a boatload of weak economic news. News from the Federal Reserve this morning concerning Industrial Production levels last month is certainly no exception.
The data from the manufacturing sector showed industrial production rebounded by 1.3% in October after a downwardly revised drop of 3.7% in September. The Fed said they had underestimated the effect Hurricane Gustav and Ike had on the chemical industry in September. Those Hurricane-affected facilities began to return to production in October, boosting the industrial output figures for last month. The strike at Boeing had a negative impact on the industrial production figures for both September and October. Excluding those two special factors, output fell about 0.7% last month - within shouting distance of most mortgage investors' expectations. Capacity Utilization rose to 76.4% in October from 75.5% in September - a bit stronger reading than anticipated -- but still well below typical usage rates for this time of year.
It took you longer to read the last paragraph than the amount of time mortgage market participants took to consider the numbers. The biggest reaction the data obviously generated among either readers or traders was an unstifled yawn. Weak economic data doesn't carry the same mortgage market friendly "punch" it once did. There will not be too much price improvement due to weaker than anticipated economic data.
STAY TUNED!
Mortgage investors have already priced-in a boatload of weak economic news. News from the Federal Reserve this morning concerning Industrial Production levels last month is certainly no exception.
The data from the manufacturing sector showed industrial production rebounded by 1.3% in October after a downwardly revised drop of 3.7% in September. The Fed said they had underestimated the effect Hurricane Gustav and Ike had on the chemical industry in September. Those Hurricane-affected facilities began to return to production in October, boosting the industrial output figures for last month. The strike at Boeing had a negative impact on the industrial production figures for both September and October. Excluding those two special factors, output fell about 0.7% last month - within shouting distance of most mortgage investors' expectations. Capacity Utilization rose to 76.4% in October from 75.5% in September - a bit stronger reading than anticipated -- but still well below typical usage rates for this time of year.
It took you longer to read the last paragraph than the amount of time mortgage market participants took to consider the numbers. The biggest reaction the data obviously generated among either readers or traders was an unstifled yawn. Weak economic data doesn't carry the same mortgage market friendly "punch" it once did. There will not be too much price improvement due to weaker than anticipated economic data.
STAY TUNED!
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