What is happening with rates this week?
Based on the economic calendar and expected "happenings" this week I think we may see a slight improvement in rates by weeks end. There is quite a bit going on this week - from Auctions, To Fed Meeting to a laundry list of data... and don't forget Stocks, they still seem to be holding the throttle of the interest rate world.
Here is what to look for for this week:
- Monday, April 27: Treasury auction of 40 Billion 2 year notes. Short maturity notes usually are well bid, which means it is not likely to move the market at all or be competition for Mortgages. (even with this being a huge number)
- TuesdayApril 28: Fed Meeting begins at 9am. This is a 2 day meeting, so don't expect any market reaction until Wednesday afternoon when they step out.
- Tuesday: April Consumer Confidence report, expected 30 vs last months 26. Hot on the heels of this report is a big 5 year auction which is more likely to move things than this little bit of welcome news. But the confidence report is not all that important... What consumers are actually doing is much more important than what they are thinking anyway.
- Tuesday: Did I mention a 5 yr auction? $35 Billion worth. The yield is expected to be just below 2% which is expected to be well bid by both foreign and domestic buyers... If the consensus us correct it will be a positive for rates, supportive of steady to possibly lower rates.
- Wednesday April 29: First estimate of Q1 GDP expected -5%. This is the first back to back quarterly decline in more than 50 years, but it is an improvement over the previous -6.3%. The 5% number is in the mix already, and it would take a surprise number of -4.8% or better to have an negative impact on mortgage rates.
- WednesdayApril 29: Yet another Treasury Auction, $26 Billion 7 year notes. by the end of this auction that's over 100BILLION in treasuries for the week. The excess supply can hurt mortgages, so this is probably the one auction (if poorly bid) can have a negative impact on rates. So hold your hats on Wednesday. Conversely if it is well bid, the stage will be set for some improvement. (the excess supply just worries me)
- Wednesday2:15pm: The fed releases its post meeting statement and there is not a chance that they will move rates. The meeting is not expected to be a market mover at all unless the FED expands its plans to purchase Mortgages and Treasuries, which is not likely.
- Thursday April 30: Initial Jobless Claims expected up 2,000. The full jobless report is due out next week, this number is not all that bad, but no one knows the true direction of the jobs market as of yet, and it is still bad.
- Thursday: First Quarter Employment cost Index expected +0.4%. Between job losses and and non existent cost increases this is not a market mover.
- Thursday: March Personal Income, Spending and PCE Index expected -0.2%, -0.1% and 0.0%. As forecast the numbers are supportive of lower rates. The PCE (consumption index) is one of the FED favorites since it shows what consumers are actually doing VS saying.
- Friday, May 1: March Factory orders expected -0.8%. Inventories have been dwindling down, which should make the second half of the year better for these numbers. At this point this is nothing more than a place holder on the calendar.
- Friday: April Institute of Supply Management, expected 38.0. This is slightly up from last month's 36.3, but not strong enough to be any worry for the credit markets.
As you can see, it is a busy week with a lot going on, but even with the busy calendar I still think we will hang more on stocks than on the data. Stocks have been bouncing back and forth for weeks now, but mostly holding onto their gains. If there is some profit taking (which is widely anticipated) we will see a flight to quality that will pour money into the credit markets driving the price up and the yield down. Out side of that potential event, it is not likely we will see any significant movement. Uncle Sam is still sitting on the sidelines to buy mortgages to calm the market down if there is too much selling. As of Noon on Monday we have a happy Mortgage market a head of the Auction at 1pm.
That's this weeks humble opinion, Have a Wonderful week!!
Rob
Mortgage Banker
www.RobertRaufHomeLoans.com or my blog: http://activerain.com/blogs/rrauf
(732)223-1630 x102
Since 1987 I have been helping my clients fulfill their dream of home ownership!
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