Weekly Economic Summary-Mortgage Rates & More

Weekly Economic Summary – February 17, 2011

Last week in review
(February 4 – 11, 2011)

To say that bonds have had a rough time lately would be a bit of an understatement, as bond pricing and home loan rates worsened very significantly over the past week and a half. By the end of last week, however, bonds looked like they were beginning to stabilize.

Impacting bonds last week were a number of remarks by Fed members, including Fed Chairman Ben Bernanke who spoke on Capitol Hill, saying it will take several more years before the unemployment rate returns to a more normal level and that lawmakers need to act to reduce the country’s deficit.

The recent tough times for bonds and home loan rates underscores the current opportunity, rates are still relatively low, but gradually creeping higher.

In the news this week (February 14 – 18, 2011)

After last week’s slow schedule of economic reports, we saw some influential reports this week. We’ll talk about this week’s reports next time and their impact on the bond market.

Tuesday morning we saw the January report of Retail Sales, which is considered a timely indicator of broad consumer spending patterns.
We also saw manufacturing news with Tuesday’s Empire State Index, which looks at New York State’s manufacturing sector and is a good gauge of manufacturing overall. Then on Thursday, we saw the Philadelphia Fed Index, which is another important manufacturing report.
On Wednesday and Thursday there was some inflation news with the Producer Price Index (PPI), which measures inflation at the wholesale level, and the Consumer Price Index (CPI), which measures inflation at the consumer level.
Wednesday we also saw housing industry news with reports on the number of Housing Starts and Building Permits in January.
Finally, the busy week of reports was capped off Thursday with the Initial Jobless Claims report.
As you can see in the chart below, bonds and home loan rates have had a tough time recently but were able to stabilize at the end of last week. In the end, bonds and home loan rates finished the week just slightly below where they started, but home loan rates are still near historic lows for now.