Learn from the Past
Mortgage backed securities (MBS) lost just 1 basis point from last Friday’s close which caused fixed mortgage rates to move sideways compared to the prior week.
– The August Consumer Price Index (CPI) was a little hotter than expected with the focus on the Core (ex food and energy) YOY hitting 1.7% vs. estimates of 1.6% with much of those gains coming from upward pressure in used car and truck prices.
– The Headline CPI YOY was up 1.3% vs. estimates of 1.2%.
– The August Producer Price Index (PPI) remains near historic lows but edged out expectations with the headline PPI YOY -0.2% vs. estimates of -0.3% and Core (ex food and energy) YOY 0.6% vs. estimates of 0.3%.
Jobs, Jobs, Jobs:
– Initial Weekly Jobless Claims hit 884K vs. estimates of 846K, the more closely watched 4 week moving average dipped lower to 970.750K.
Continuing Claims were higher than expected, 13.385M vs. estimates of 12.925M. The July Job Openings and Labor Turnover Survey (JOLTS) was higher than expected, showing 6.618M unfilled jobs vs. estimates of 6.000M. June was revised upward from 5.889M to 6.001M.
Central Bank Palooza
The European Central Bank kept their key interest rate at 0.0% and their deposit rate at -0.5%, and did not announce any changes to their bond purchase program. The Bank of Canada kept their key interest rate at 0.25%.
What’s on the Agenda for this Week?
The three areas that have the greatest ability to impact backend pricing this week are: (1) Central Bank Palooza, (2) Geo-Political and (3) Domestic Flavor.
(1) Central Bank Palooza: We hear from the Central Banks from 3 of the 6 largest economies in the world. The Bank of Japan (with a fresh new PM) and Bank of England (with Brexit looming) will be interesting this week but it will be our Federal Reserve on Wednesday that will be the biggest market driver of the week. They will issue their interest rate decision (no suspense there, they have already beaten us over the head with the idea that they are not going to touch rates for a very long time); there will be a live press conference with Fed Chair Powell; and they will issue their Economic Projections (the famous “dot plot” chart).
(2) Geopolitical: Brexit is back in the spotlight as they have an important Parliamentary procedural vote today as the Brexit FINALLY concludes this month. Domestically, we have movement on keeping our government open past the end of the month and no movement on a new Covid stimulus bill.
(3) Domestic Flavor: There will be some key economic releases this week to focus on, including Retail Sales which is expected to moderate into more realistic levels now that the $600 weekly “helicopter” money has stopped. Also Initial Weekly Jobless Claims will continue to get a lot of attention.
There were no major economic events today.
On Deck for Tomorrow: FOMC begins two days of meetings, Import and Export Prices, Empire Manufacturing Index, Industrial Production and Capacity Utilization.