Market Comment

Mortgage bond prices traded up and down within a relatively narrow range last week. Rates were pressured higher following stronger than expected gross domestic product data and the Fed rate cut Wednesday. Fortunately significant stock weakness and employment cost index data that was in line with expectations helped buoy bonds a bit.

For the week, interest rates on government and conventional loans were near unchanged.

The preliminary productivity data Wednesday will be the most important event this week. The Treasury auctions, trade data, and consumer sentiment releases will also be important.

Looking Ahead

Economic Indicator	Release Date & Time	Consensus Estimate	Analysis
Preliminary Q3 Productivity	Wednesday, Nov. 7, 8:30 am, et	Up 2.5%	Important. A measure of output per hour. Weakness may lead to lower mortgage rates.
10-year Treasury Note Auction	Wednesday, Nov. 7, 1:30 pm, et	None	Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Consumer Credit	Wednesday, Nov. 7, 1:30 pm, et	Up $8 billion	Low importance. A significantly larger than expected increase may lead to lower mortgage interest rates.
30-year Treasury Bond Auction	Thursday, Nov. 8, 1:30 pm, et	None	Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
Trade Data	Friday, Nov. 9, 8:30 am, et	$58 billion deficit	Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
U of Michigan Consumer Sentiment	Friday, Nov. 9, 10:00 am, et	81.0	Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.

Productivity

Fed officials remain concerned that inflation is a threat but continue to lower rates amid credit concerns. Increased productivity is often credited for economic growth with little signs of inflation.

Productivity is the rate at which goods or services are produced. It is most commonly defined in terms of labor, which is the contribution of people to the process. Labor costs represent about two thirds of the value of the output produced. The Bureau of Labor Statistics of the US Department of Labor releases the most widely cited productivity statistics quarterly and annually.

Productivity is significant in that as it increases, businesses can produce more with the same or less input. This wealth building effect is vital to the US economy. As productivity increases, the US economy generally performs better. As productivity decreases, the economy generally suffers.

While the bond market generally favors signs of weakness in the economy, bonds tolerate growth as long as the economic environment shows little or no inflationary pressures. Fortunately, inflation has remained in check as of late.

Keep in mind that rates remain historically very favorable. Now is a great time to avoid the uncertainty surrounding continued market volatility by locking your loan. Capitalizing on current levels is prudent to protect against future volatility.

Copyright 2006. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com  The information contained herein is believed to be accurate, however no representation or warranties are written or implied. PERL Mortgage is an Illinois residential mortgage licensee and equal housing opportunity lender.