Mortgage Rates Ride the Wave of Data, July 15, 2010

Mortgage Rate Trend Direction:     Down

Economic Reports/Rate Impact:    Jobless claims, 8:30 AM ET, Moderate Rate Impact

                                                  Empire State Index, 8:30 AM ET, Moderate Rate Impact

                                                  Industrial Production, 8:30 AM ET, Moderate Rate Impact

News:                                         European Debt and Monetary Crisis

Summary

Near the close of the market yesterday mortgage-backed securities spiked but their was little time left in the day to pass along any mortgage pricing improvements. Most lenders probably held off with changes, preferring to see what today brings, given the amount of data and news scheduled for release. News on inflation, manufacturing activity and initial jobless claims along with earnings reports from JP Morgan Chase and Google will guide the markets and mortgage rates today. Mortgage rates are likely to start the day lower to their closing pricing yesterday.

Impact of economic reports released today

The Producer Price Index which is a measure of inflation in the manufacturing sector showed a dramatic drop from expectations. This could be a sign of deflation, which is very unhealthy for the economy. Initial Jobless Claims also showed a large drop in both first time claims as well as continuing claims, though analysts were quick to point out that a technical issue with the forecasting model likely caused the drop. The biggest surprise came from the NY Empire State Index which gauges manufacturing activity in the state of New York. Activity dropped dramatically providing a clear sign of slowing in the economy.

Impact of international or political events

Two positive events in Europe today are likely to keep fears of debt or monetary collapse out of the minds of traders today. First, a relatively strong Greek bank offered to purchase parts of two weaker rivals, giving hope that the troubled banking sector may consolidate into fewer, stronger entities. Second, Spain held a very successful auction of 15-Year bonds. Earlier in the week successful auctions in Greece, Italy and Portugal also provided evidence that investors are willing to buy the debt of these trouble nations.