Mortgage bond prices rose last week helping mortgage interest rates improve slightly. We started the week on a positive note with rates falling amid tame inflation readings. The producer price index
fell 0.6% and the core rose 0.1%. The headline figure was the lowest since July 2009. Weekly jobless claims showed the employment situation remained poor. Unfortunately we saw the market fall a bit pushing rates higher Thursday afternoon following the announcement
of the size of the upcoming Treasury auctions and amid fear of future rate hikes. Rates fell about 1/8 of a discount point for the week.
The durable goods and gross domestic product data will be the most important releases this week. Supply concerns will continue to weigh heavily upon the bond market with the continued record Treasury auctions. If foreign demand falters mortgage interest rates
could be pressured higher.
Gross Domestic Product
The Gross Domestic Product (GDP) is one the most important reports during any given quarter. GDP is a measure of US economic output and spending. The report is significant in that it provides investors,
analysts, traders, and economists with a comprehensive report of the direction of the economy. In addition, it also influences the decisions of Federal Reserve policy makers, Congressional budget employees, and corporate financial planners.
GDP is the sum total of goods and services produced by the United States. The initial report is often based on incomplete data. Therefore, additional revisions are released over the following two months. There are often substantial differences between the initial
release and the revisions. The mortgage-backed security market generally responds favorably to weaker GDP growth.
While revisions generally don't move the market like the original release, they still have the potential to cause market volatility if vastly different from the prior releases. Be cautious heading into the data this week.