Forecast for the Week

A full week of economic reports is ahead. Plus the Fed meets, and it could make an important decision regarding its Bond and Treasury purchases.

• Economic data kicks off on Monday with manufacturing data from the Empire State Index, followed by the Philadelphia Fed Index on Thursday.
• Tuesday brings important inflation data, with the Consumer Price Index for August.
• Also on Tuesday, look for the National Association of Home Builders’ Housing Market Index, which will be followed by Housing Starts and Building Permits on Wednesday and Existing Home Sales on Thursday.
• Weekly Initial Jobless Claims will also be reported on Thursday. Last week’s claims fell by a whopping 31,000 to 292,000, which was the lowest reading since April 2006. However, the Labor Department said that two states weren’t able to process all of the claims due to changes in their computer systems.

In addition, the policy statement from the Fed’s meeting is expected to be released at 12:30 p.m. ET Wednesday. This will be followed by the FOMC economic projections at 2:00 p.m. and a press conference by Fed Chairman Ben Bernanke at 2:30 p.m. This activity could have a big impact on Bonds and home loan rates.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on.

When you see these Bond prices moving higher, it means home loan rates are improving — and when they are moving lower, home loan rates are getting worse.

To go one step further — a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Mortgage Bonds have stabilized ahead of the Fed meeting. I’ll be watching the news closely to see what the Fed has to say.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday September 13, 2013)

The Mortgage Market Guide View…

Date	ET	Economic Report	For	Estimate	Actual	Prior	Impact
Mon. September 16	08:30	Empire State Index	Sep	NA		8.6	Moderate
Tue. September 17	08:30	Consumer Price Index (CPI)	Aug	NA		0.2%	HIGH
Tue. September 17	08:30	Core Consumer Price Index (CPI)	Aug	NA		0.2%	HIGH
Tue. September 17	10:00	Housing Market Index	Sep	NA		59	Moderate
Wed. September 18	08:30	Building Permits	Aug	NA		943K	Moderate
Wed. September 18	08:30	Housing Starts	Aug	NA		896K	Moderate
Wed. September 18	12:30	FOMC Meeting	Sep	NA		.25%	HIGH
Thu. September 19	08:30	Jobless Claims (Initial)	9/14	NA		292K	Moderate
Thu. September 19	10:00	Existing Home Sales	Aug	NA		5.39M	Moderate
Thu. September 19	10:00	Philadelphia Fed Index	Sep	NA		9.3	HIGH

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