Forecast for the Week: Inflation news and Retail Sales highlight a busy end of the week

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The second half of the week heats up with key reports on inflation and Retail Sales.

• Look for a double dose of inflation news with the Producer Price Index on Thursday and the Consumer Price Index on Friday.
• Weekly Initial Jobless Claims will also be reported on Thursday.
• On Friday, Retail Sales and the Consumer Sentiment Index will be released.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.

When you see these Bond prices moving higher, it means home loan rates are improving. When Bond prices are moving lower, home loan rates are getting worse.

To go one step further, a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes are on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Mortgage Bonds have been holding steady in recent days. Home loan rates remain attractive.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Jan 05, 2018)

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