Bom dia! Estou ainda em Rio de Janeiro, Brasil. Well, last night the airplane had a part that needed to be replaced and they could not get it to the airport in time before we “timed out” for our flight home. As a result, I have an extra day in Rio, which is not as good a deal as you might think. Nevertheless, I get to do this report on time but I had to delay the radio show until tomorrow, so join me tomorrow at 11:00 for this week’s Mortgage Market Weekly.
Last week was a bit of a surprise as we saw mortgage rates push lower still, which no one I know forecast as the week began. We did get a corrective move as well and that set up where we are now, and overall both moves emphasize the need to follow my daily updates, currently only at Florida Mortgage Daily, and not just the weekly post and radio show. A lot of the reasoning behind the improvement rests in the fact the housing market sucks. We saw Existing Home Sales drop 2.2% versus an expected improvement of 6.0% (not exactly sure what they were smoking by predicting this) and New Home Sales not only dropped 32%, but March and April (pre-tax credit expiration) were revised lower as well. The FOMC Meeting announcement was mostly the same and gave a boost to MBS prices as well, but the Treasury Auctions were mixed with the 2-year T-Note doing well, the 5-year T-Note doing poorly and the 7-year T-Note seeing improvement. Overall, economic data pointed towards the lack of even a modest economic recovery, though Consumers Sentiment improved slightly. The swings in MBS prices last week are setting up what lies ahead for mortgage rates, which will likely be set in stone this week.
That’s right, this week, with all of its data, will likely make or break the back of MBS prices and low mortgage rates. We started off already with the Fed’s favorite gauge on inflation, the Personal Consumption Expenditures or PCE, and guess what, inflation is still tame as I have been talking about recently. But the fun won’t end today as data will keep coming all week, culminating with the Jobs Jamboree on Friday since this week ends in July. Here is the current breakdown of coming attractions…
- Monday: Personal Consumption Expenditures (PCE – 8:30), Personal Income (8:30), Consumer Spending (8:30), Chicago Fed National Activity Index (8:30), 3-month T-Bill Auction (11:30), 6-month T-Bill Auction (11:30)
- Tuesday: S&P Case-Shiller HPI (9:00), Consumer Confidence (10:00), 4-week T-Bill Auction (11:30), 52-week T-Bill Auction (11:30)
- Wednesday: MBA Purchase Applications (7:00), ADP Employment Report (8:15), Chicago PMI (9:45), Crude Inventories (10:30), Dennis Lockhart Speaks (12:30)
- Thursday: Jobless Claims (8:30), ISM Manufacturing Index (10:00), Construction Spending (10:00), Pending Home Sales (10:00), 10-year TIPS Announcement (11:00), Money Supply (4:30)
- Friday: Nonfarm Payrolls (8:30), Unemployment Rate (8:30), Average Workweek (8:30), Average Hourly Earnings (8:30)
As you can clearly see, there is quite a bit of heavy-hitting data coming our way as the week unfolds. With MBS prices set to make another attempt on breaking their recent highs, this data (and the charts) could allow them to do exactly this. However, data could also set up a trend reversal this week, so keep a close eye on each day as the week progresses. The week is starting off optimistically for lower mortgage rates and a continued uptrend, but don’t drop your guard.
Speaking of the charts, they continue to look pretty good as all moving averages continue to move higher still. In fact, the only real negative side is that stochastic indications are still in the overbought spectrum, but even those have room for MBS price improvement. With a fairly solid retracement happening last week, the charts are giving MBS prices virtually a green light to push higher. The question is whether or not data will support that move or bring them crashing down.
The bottom line for this week is to start off happy and in a “floating mood”, but be ready for anything as data will clearly play a large role in shaping the future as the week progresses. The charts point towards lower mortgage rates and are currently being supported by data, but things could change, and quickly, as you well know by now. I hope to catch you all on the radio show tomorrow at 11:00 and feel free to chime in any questions. I will add more time just in case there are quite a few.
Comments(2)