Updated on July 18, 2019 10:23:34 AM EDT
Yesterday afternoon’s release of the Fed Beige Book did not reveal any surprises. It showed that the economy grew modestly in most Fed regions since the last update while concerns still exist about the effects of the trade war and its impact on future growth. The bond market did improve during afternoon trading yesterday, but it does not appear that this release was the cause of it.
Last week’s unemployment figures that were posted at 8:30 AM ET this morning revealed that 216,000 new claims for unemployment benefits were filed. This was an increase from the previous week’s revised 208,000 initial filings. Since rising claims is a sign of employment sector weakness, the figure was good news for bonds and mortgage rates. However, it nearly pegged expectations and this is only a weekly snapshot of the sector. Therefore, we have not seen a reaction to the news this morning.
Junes Leading Economic Indicators (LEI) were also released this morning, but at 10:00 AM ET. The Conference Board announced a 0.3% decline in the indicators when analysts were expecting to see no change. The decline means they are predicting weaker economic activity over the next several months. Since bonds tend to thrive in weaker economic conditions, this was good news for mortgage rates. Unfortunately, this is not considered to be a highly important release, preventing it from having much of an impact on this morning’s mortgage pricing.
The final economic report of the week will be the University of Michigans Index of Consumer Sentiment at 10:00 AM ET tomorrow. This index is released in a preliminary form each month and then followed up two weeks later with a final reading. The preliminary reading for July will be posted tomorrow and is expected to show an increase from Junes final reading of 98.2. This would indicate that surveyed consumers were a little more comfortable with their own financial and employment situations this month as they were last month. It is believed that if consumer confidence in their own finances is rising, they are more apt to make a large purchase in the near future. And with consumer spending making up such a large part of our economy, investors pay close attention to reports such as these. This means that a decline in confidence would be good news for mortgage rates because it means many consumers will probably delay making a large purchase, limiting economic growth.
©Mortgage Commentary 2019