Mortgage bond prices finished the week near unchanged which kept rates in check. Trading was negative the beginning of the week tied to comments from Fed officials. San Francisco Federal Reserve Bank President John Williams said the last meeting to keep rates unchanged was a “close call.” He went on to note, “the public or market perceptions were that we had completely moved off 2015, and I don’t think that was accurate.” Cleveland Fed President Mester said the economy can handle a rate increase. The end of the week data helped alleviate some of the earlier weakness. Retail sales and producer prices were lower than expected. Mortgage interest rates finished the week near unchanged despite the volatility.
The Federal Reserve releases the Industrial Production report each month. It is a real measure of output from manufacturing, mining, electric, and gas utilities. The data is significant in that it provides an indicator of the state of the economy. Analysts use the data to attempt to determine market direction. The Fed uses the data to help set the course for monetary policy. Generally the Fed likes to see steady growth in the economy with little price pressures.
Mortgage interest rates generally react favorably to weaker than expected industrial production data. In times of economic weakness investors often move out of stocks and into mortgage bonds. When things look good investors often move out of bonds and back into stocks. We have seen these patterns in recent months. Floating into significant economic data always has some risk involved. Now is a great time to take advantage of mortgage interest rates.