I hope everyone had A Great Memorial Day weekend, and took some time to recharge your batteries and are back to the daily grind, refreshed and full of energy! As I thought last week, the shortened trading week had a bit of a sell off in the abbreviated trading session. Today we have had a mixed bag of ups and downs. It is hard to say where we will be by time the closing bell rings at the Credit Markets.
There is a mixed bag of Uncle Sam buying and Selling at the same time this week along with typical end of the month data etc... Here is what is in store for us this week:
- Tuesday May 26: No reports, just the Fed buying Treasuries with maturities between 2010-2032. This is not likely to cause any ripples in the mortgage market
- Tuesday: Consumer Confidence expected at 42.3. Well the annalists should all be FIRED, they got this one wrong. CC ended up being 54.9, MUCH stronger than anticipated. The market is not that happy about it, but will probably settle down. The Market is typically much more concerned with how a consumer is acting vs how they are feeling. They may be confident, but if they are not spending it is not going to do the economy any good.
- Tuesday: First of the auctions of the week, $40 billion in 2 year notes. the 2 year note yield is already below 1%, it is not likely we will see it pushed any lower by investors. Normally the short term "stuff" doesn't have any effect on long term mortgage rates... But this might if there is not an appetite for it.
- Wednesday May 27: Fed is back in the market buying treasuries maturing between 2012-2013. this is more of a refinancing of debt since rates are low now, it makes sense to take out the higher rate "stuff" and replace it with some new lower interest rate debt. The problem here is that we have no idea how much they are going to buy. So if they don't buy much... it could be a bad thing and may cause a Hic-Up in rates.
- Wednesday May 27: April Existing Home Sales expected up 2.0%. The decline in home sales has been softening. That may mean that housing may be near a bottom. it has been more than 17 years since homes were this affordable. As forecast it is not likely to cause rates to bump up.
- Wednesday: Treasury Auctions $35 Billion in 5yr notes. The 5 yr yield is above 2% and is likely high enough to keep investors interested and buying. this interest should be supportive of steady rates.
- Thursday May 28: Initial Jobless claims expected up 4,000. New claims are not expected to show any large increase... as forecast this is not a market mover.
- Thursday: April Durable Goods expected +0.4% ex Auto -0.3%. These should be the numbers that analysts look at rather than confidence numbers. As you can see here no one is buying long term "stuff" Cars are the bulk of the number because of the huge incentives by auto makers. But, in the crazy market we have been in this year, it is not likely to be a number that is going to move things.
- Thursday: More auctions... this time $26 Billion in 7 year notes. What surprises me here is the yield difference this time around. 2 yr sub 1%, 5 yr above 2, and 7 flirting with 3% (2.9%)... There should be appetite here. The 2 yr has such a low rate because no one knows where to put money, so it has been a parking spot for cash as investors play the waiting game. If the 7 yr auction is not well bid (unlikely) we will see pressure in the mortgage market and may see rates climb.
- Friday, May 29: Revision of first quarter GDP expected -5.5%. As forecast this is a "non event" but if the revision is significantly better (-5.0 or stronger) it may cause a rally in stocks and that has been a bad news scenario for mortgage rates all year. I doubt that GDP will show much strength, so not a likely event.
In case you were not counting that was $101 BILLION up for auction this week. so the Auctions are the biggie of the week. Last weeks Rumors that the UK may have its credit rating down graded below AAA has thrown ripples through out the markets. Lets hope that foreign investors step in and buy our stuff to show their confidence in the USA. If they do not, we will see rates higher at the end of the week. Also pay close attention to stocks. Rallies in the stock market will be bad for rates as Equities rob from the Credit markets. I think by the end of the week we may see rates unchanged to slightly higher, but my crystal ball is cloudy, so I am NOT committing to anything!
That's this weeks forecast/calendar!
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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