Mortgage Rates, and What May Move Them This Week: November 22, 2010

 

 Last week was another bad one and by the close of business on Friday we saw Fannies lose 20/32nds for the week.  The good news is it could have been worse since we saw a bit of a rebound on Thursday. Last week was a mixed bag for data with Retail sales being considerably stronger than anticipated (+1.2%) but both PPI and CPI were much lower than anticipated and clearly show no immediate fears of inflation with the core for PPI -0.6% and CPI a core of 0%.

This week is a confusing one, (more on that below) Here is the Calendar:

• Monday November 22: Today's 2yr note auction was well bid and the market is pretty happy about it, but that is just $35 billion of the $96 billion in auctions for the week.
• Tuesday, November 23: Revised third Quarter GDP expected 2.4%. This is an improvement over the first guess of GDP but it is pretty much priced into the market already... It will only become an issue if we are shocked by a much stronger report.
• Tuesday: Existing Home Sales for October expected down 0.6%. Home sales are up significantly since July, but still well off last years pace. This report should be supportive of steady rates.
• Tuesday: Auction #2 with $32 Billion in 3 year notes. I have high hopes that this auction will mirror Monday's since it is such a similar short term offering. 
• Tuesday: Minutes of The Fed's November meeting released. As always, anything "Fed" will be looked at closely. It is anticipated that the Fed will be concerned about growth over the coming year (or the lack of growth) and this is likely to be supportive of steady rates, and quite possibly lower rates if the language is overly gloomy.
• Wednesday November 24: October Durable Goods expected 0.0% w/o Transportation +0.6%. This is not a likely market mover.
• Wednesday: October Personal income expected +0.4% spending +0.5% and PCE 0%. The consumption index (PCE) is the key report in this group. If consumption stays flat it is supportive of steady to possibly lower rates, but if we see a bounce in consumption we WILL see rates bump up, especially ahead of the holiday..
• Wednesday: October new home sales expected +1.0%. while this looks strong, housing is still week and this is not a likely market mover.
• Wednesday: A day early for the holiday, Weekly jobless claims expected down 4,000.  Still well above 400k, this is still a weak report that is not likely to cause any concerns.
• Wednesday: 1pm, Treasury auctions $29 Billion in 7 year notes. Rates have climbed quite a bit over the past few weeks, so hopefully this create some appetite for this auction since the yield is quite a bit higher than it has been recently.
• Thursday: HAPPY TURKEY DAY!  Enjoy your day off, and have some fun with your family! Of course the market is closed for the day as well!
• Friday November 26: a no news day, and a short one for the mortgage market which will close at 2pm.

As I mentioned above, this could be a confusing week.  The excess supply in the market is always a concern especially since Congress seems to be against the Fed buying treasuries.  Now toss in a Dollar that is currently in the proverbial toilet that may keep foreign investors away... and just mix in Turkey Day into the mix and it is a potential recipe for a disaster.  The Wednesday before Thanksgiving is the busiest travel day of the year, and at 1pm the Treasury is auctioning off Billions in 7yr notes... Someone forgot to check the calendar when this auction was scheduled.  If we have light trading this could be a difficult pill for the market to swallow.  Of course Friday may be a trading day, but not many people will be working so sprinkle in another day of light trading, and potentially conservative trading ahead of the Thanksgiving holiday and pseudo Friday holiday. It is this mix of supply and holiday action that has me concerned the most this week, it will be difficult to picture rates dropping in this environment, but it is easy to see them bounce up.

That's my 2 cents worth of opinion for the week, Have a VERY HAPPY Thanksgiving! Enjoy some time off, you deserve it! 

Have a great week!

Rob

Robert Rauf

Mortgage Banker

NMLS ID# 248937

www.RobertRaufHomeLoans.com   or my blog: http://activerain.com/blogs/rrauf

(732)223-1630 x102

RRauf@REMN.com

Since 1987 I have been helping my clients fulfill their dream of home ownership!

Real Estate Mortgage Network Inc.

 

 

 

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